SEPTEMBER 6, 1961

PAGE 18340

FUEL OIL IMPORTS

Mr. MUSKIE. I compliment the distinguished senior Senator from Rhode Island for the leadership he is showing in protecting the interests of our common New England region with respect to this particular critical problem.

Mr. President, in Maine we have an old saying about our weather: "We have two seasons, July and winter." When it comes time to pay our fuel bills, we are apt to think someone left out July.

Winter, which costs New Englanders perhaps half again as much to keep warm as it does the average U.S. citizen, is just 3 months away. The cost of fuel, therefore, is a major concern to us in terms of home heating, heating for public buildings, industrial uses, and thermal production of electricity.

New England has historically depended on residual oil because it is the least expensive fuel available. It has been the principal fuel of industry, schools, apartment houses, hospitals, and public buildings. Under these circumstances, it is understandable that we view with a jaundiced eye any efforts to restrict the supply of residual fuel in our area.

To put the issue as bluntly and simply as possible, I believe that the present import control program which restricts the shipment of foreign residual fuel oil for our domestic market is harmful to our national interest and injurious to the citizens of New England in general, and Maine in particular.

To some, this may seem to be an issue which necessarily divides one area of our Nation from another. This has been the nature of the debate over residual oil imports, but I do not believe it is the nature of the problem. After reviewing the facts involved in the production of domestic crude oil and its products, the consumption of residual oil and other fuels, the problems of the domestic coal industry, and our relationship with other oil-producing countries, I am convinced that the oil import control program, especially as applied to residual fuel oil, is based on false assumptions. I am certain that these restrictions can be removed without injury to any substantial segment of our economy.

Since the residual oil import program was instituted in the spring of 1959, fuel oil costs in New England have increased tremendously. The average price per barrel has increased about 30 cents in just 2 years. Competition in the industry has declined considerably, encouraging high profits for the distributors, and squeezing the poor consumers. The price has not only injured the direct user of residual oil; it has also resulted in higher electric bills in the northeastern area which already has some of the highest power rates in the country. The July 1960, increase of 15 cents per barrel to electric utilities has cost customers of the Central Maine Power Co. an estimated $230,505 in increased electric power rates.

Comparable increases have adversely affected our manufacturers, already hard pressed in competition with those in other areas of the United States and with foreign industries. We cannot afford to bear this cost, and I do not believe it is fair to impose an artificial burden on our workers.

It has been argued that residual fuel import restrictions are necessary in order to protect the domestic oil and coal industries. But such an argument does not stand up. In the first place, the domestic oil industry is producing less and less residual oil, relative to its total crude production.

In 1950, 20 percent of our domestic oil products was represented by residual fuel- by 1960, that proportion had dropped to 11 percent. Domestic refiners have found it more profitable to shift the production to gasoline and other distillates. Some refineries produce no residual. By contrast, foreign sources concentrate on residuals. In Venezuela, for example, the yield of residuals from crude averages 50 percent. For some refineries the yield is as high as 70 Percent.

The representatives of our coal-producing areas have argued that the residual fuel oil import restrictions are a necessary protection for the declining coal industry. Actually, the total domestic residual oil consumption has been remarkably stable in the last ten years. From 1950 to 1960, for example, total consumption of residual fuel oil increased only three million barrels, from 554 million barrels to 557 million barrels. This is hardly a drastic increase in the use of a competing fuel.

At the same time, east coast consumption has gone up from 255 million barrels in 1950 to 319 million barrels in 1960. In New England, consumption rose from 51 million barrels in 1949 to 71 million barrels in 1959. Obviously, the east coast and New England have suffered the most from the import restrictions.

Why has the consumption of residual fuel oil increased so much in our area, while remaining fairly constant in other areas of the country? The simple fact is that coal is not and cannot be competitive, because of shipping costs. It costs more to ship a ton of coal from West Virginia to New England than the cost of the coal at the mine mouth. For example, one large coal user in New England has been paying $5 a ton for or the coal at the mine mouth and $5.75 a ton for freight. For most users, coal consumption under these circumstances is and would be uneconomic.

Present users of residual oil will not pay the high costs of conversion to return to the use of coal, when more than half the cost of coal consists of freight charges.

It should be clear, from the facts I have cited, that New England is being asked to pay a high cost in increased fuel costs for an import policy which is not going to do the job its supporters want. All we ask is that we be released from this burden.

Mr. President, I have said that this is not only a policy which injures New Englanders; it is one which is harmful to the national interest. In the first place, it will encourage uneconomic use of our domestic crude oil, by pressuring refiners to produce more residual fuel oil at the expense of more profitable distillates. In the second place, it will hamper the growth of industries in an important area of our country. Finally, it will continue to be an irritant in our relationships with Venezuela and other important Latin American countries.

I am fully aware of the problems confronting our coal mining areas. I believe they need and deserve help. That is why I worked so hard for the Area Redevelopment Act.

I understand the problems of import competition. That is why I introduced S. 1735, the Orderly Marketing Act of 1961, which would help protect domestic industries against a flood of low-cost imports.

I believe in the sound use of our natural resources. That is why I cosponsored the national fuels policy resolution. This, to me, is the road to prosperity and sound conservation for all segments of our domestic fuels industry.

I ask our friends from the fuels producing States to join us in removing an unnecessary, unrealistic, and misleading policy which is injuring one section of our country, without being of benefit to another. I urge widespread support for removal of the restrictions on imports of residual fuel oil.