greater natural restrictions than other major petroleum consuming areas, such as Europe and Japan, and these factors have placed definite limitations on the size of U.S. flag vessels which can be safely and economically utilized in domestic trades. These same limitations hamper the ability of these vessels to compete on a worldwide basis under a rate structure governed by costs of VLCC's (Very large crude carriers).

In spite of al'egations that the U.S. tanker fleet is old and outdated, a study of the facts reveals that a substantial portion of these vesse's have been built in recent years. The larger sized tonnage which now find employment almost impossible in domestic trades and which, save for their higher U.S. building cost and higher level of operating expenses, is indigenous to all our domestic industries, are equal in every other way to the capability of their counterparts of comparable size in foreign flag competition. In more recent years, some 25 tankers, totalling some 1,400,000 dwt., have been completed in U.S. shipyards and an additional 12 tankers, totalling some 1,050,000 dwt., are presently under construction or on order for delivery in 1972/1973.

At the present time, the United States is having difficulties meeting its own domestic energy requirements and has found it necessary to consider the utilization of a greater percentage of foreign sources of energy, particularly crude oil and petroleum products. A recent forecast of the National Petroleum Council indicates that the level of our petroleum consumption in this country will increase from approximately 15 million barrels per day to something in excess of 18 million barrels per day by 1975, 22 million barrels in 1980 and to 26 million barrels per day in 1985. With forecasted domestic production plateauing at 17/18 million barrels per day, including North Slope production in the latter years. This report indicates a level of dependence on imported oil at nearly 56% of our domestic supply. It is also obvious that as we require additional imports, we will have to procure a greater percentage from producing areas located a greater distance from our shores requiring longer transportation links between these areas and our ports.

Presently, the demand for U.S. flag tonnage appears to have declined in the amount of approximately 1 million deadweight tons (or 8.0%) with indications that this situation will worsen. It would, therefore, appear that as a Nation who is becoming more and more dependent on foreign sources of energy, we are arriving at a position where our ability to control the transportation and redirection of these fue's in any National emergency wou'd be severely dependent on the utilization of foreign built and manned vessels. If this situation continues to prevail, it is evident that many of the tanker owners who have invested through the years in the American tanker fleet will face a crisis of such portion that they will in no way be able to continue to function and their ability to participate in any programs which are envisioned under the Merchant Marine Act of 1970 will be completely eliminated by their financial plight.

It is obvious, therefore, that in some ways we have ignored the companies and investors who have participated throughout the years to maintain investments in the American fleet and the facilities for transporting our petro'eum requirements. We, as a matter of principal, support a strong domestic oil policy with proper restraints on use and dependency of foreign oil imports. However, as increased imports become a reality, we shou'd not make the same mistake by becoming overly dependent on foreign flag vessels for all of this transportation.

It is our feeling that this country must maintain a position which reflects a certain degree of independence in the areas which are vital to our National security and I feel that just as we must have a strong National Defense and a strong domestic petroleum capability, so too must we have a strong transportation capability which only U. S. flag tankers can offer to meet such situations.

We can only look back a few years to see the indispensable role these vessels have played in protecting our national interests, and we feel that the continuing presence of this fleet will prove just as important in the future.

One must also become increasingly aware of the impact of the greater oil imports on our Balance of Payments. Based on the foregoing referenced report of the National Petroleum Council, the cost of imports could exceed 6 billion dollars per year without consideration of further price increases from present levels. Transportation cost associated with the level of imports could exceed 2 billion dollars a year. It is, therefore, obvious that we face a most serious problem with respect to our Balance of Payments should we become committed to a policy of having to procure our transportation of imports from foreign sources as presently being accomplished.

It is, therefore, our feeling that the only way in which we can hopefully sustain the privately owned American flag tanker fleet at a reasonable level consistent with our overall national interest is for the enactment of the legislation which is pending before this Committee, and I strongly recommend a prompt enactment of this Bill which we feel is vital to the survival of a viable domestic tanker fleet. I appreciate the opportunity to present our views before this Committee.

Senator SPONG. Mr. Clark and Mr. Haddock.

STATEMENT OF EARL W. CLARK, CODIRECTOR, LABOR-MANAGEMENT MARITIME COMMITTEE; ACCOMPANIED BY HOYT S. HADDOCK, CODIRECTOR; AND IRWIN M. HEINE

Mr. CLARK. Mr. Chairman, I am reminded of the paragraph in the Scripture which says, "Seeing we are surrounded with such a cloud of witnesses, let us lay aside every weight." I would add to that, "try to get to the point quickly."

Senator SPONG. Bless

you.

Mr. CLARK. It being now 12:25, I think we can do this. Mr. Chairman, we have submitted to this committee this document "The Growing Energy Crisis and the U.S. Tanker Fleet" which I am holding up here. We submitted this document to the entire Merchant Marine and Fisheries Committee of the House; we also submitted it to your distinguished committee; and knowing the busy time of Senators, we have put a synopsis in the front, with the hope that on an airplane or at some other time you can squeeze out of your busy schedule time to glance at it.

It is a frightening thing. I think I need not dwell on that, because this committee is very much aware of that.

I am Earl W. Clark, codirector of the Labor-Management Maritime Committee. On my right is Mr. Hoyt Haddock, also codirector, and Mr. Irwin Heine, who is a consultant to this organization.

We will not engulf ourselves in the technical aspects of whether S. 3404 will increase consumer costs. We will leave that to the experts in the field. Mr. Hettena will testify tomorrow and will discuss this matter of the foreign and domestic flag oil transportation cost and its implications. We support the position taken by Mr.. Hettena, which will be described here tomorrow morning.

Just a few highlights we would like to have in the record, Mr. Chairman. I testified before the House Merchant Marine and Fisheries Committee on this "ghost" of retribution. The ghost of retribution by other nations has been thrown around by various government agencies for the past 20 years. It was being thrown around when I was Deputy Maritime Administrator back as early as 1950.

I think much of it is a ghost. I don't say there is not some reality, but much of it is a ghost. I am told that Kuwait and Iraq are already planning for big tankers to carry oil, long before this proposition ever hit this committee or the Congress of the United States. And I understand also that some of the other Arabian countries are also planning the same thing. They are going to build tanker fleets.

And then they come before you and say don't do this thing. Let's have great fear of employing these 25 laid-up U.S. tanker ships, because it is liable to upset the whole world, you see, I don't buy that. I would suggest that your committee and its good staff inquire from

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the State Department and those who have expertise in this field, just who of the Arabian countries are already moving in this direction. without regard to this bill whatsoever. I think it would be a fine thing to have in the record and I think the Government should answer that question. They, the oil-producing countries, are already moving on this.

Now, the thing that has concerned me a little, too, as I listened to the testimony, both in the House and Senate, is that the larger oil companies move away pretty much from this matter of rates and into the problem of how they are going to cover their capital costs for the future, how they are going to build the ships, and accomplish expansion.

Let me say to you that if they pursue the course they have over a number of years, I believe, they will do it at the expense of American flag shipping. Of course, they are going to continue to have ships under the Liberian flag; of course, they will have ships under Honduras, Panama, what-have-you, because not only are there tax benefits, great tax benefits in doing so, but they avoid the U.S. economy, and its costs. So I think the committee needs to look into the basic reason for opposing a bill that merely puts together employment for some 25 tankers at the present time-small tankers in the American flag fleetwhether you are going to sacrifice and send it down the river and have no more U.S. flag fleet at all in this country in order to help the future capital and ship construction needs of the big oil companies. I encourage the committee to look at that because every witness on this subject seems to stress how they are going to provide for their future capital costs, and shipping costs.

I think foreign shipping is the way they are going to do it. The thing that surprises me is that the State Department and the Interior Department take the same trends. The oil companies couldn't have written it better.

It has been pointed out here that there is the subject of treaty conflict. I brought over here the full listing of the most favored nations and the friendship, commerce, and navigation treaty countries which I will not take time to put into the record, because it has been put into the record this morning. France and Spain and Peru and Chile-are moving in the direction of this bill and Japan, by other means.

So I just think the matter of treaty conflict is something that has been overdone. Also, the State Department told me yesterday that there are clauses in these friendship, commercial, and navigation treaties that allow countries to move away from certain restrictions providing it is a matter of national security.

I say to you if you have an opportunity to read this booklet, on the growing energy crisis, that it is a matter now of national security, in our opinion.

Now, Mr. Chairman, I am going to try to conclude, because time is running out and I don't want to overdo after my promise to you in the beginning. But I think we have an overstated impact on the effects

of this bill. Section 901 (b) (1) provides that you apply cargo preference only as American-flag ships are available at a reasonable price. That is written into the very context of section 901 (b) (1).

Just give me a little time to pursue that. So what do you do by this bill? You may put 25 small tankers to work. You may put some seamen to work. You may help your balance of payments.

Can anyone believe that the Merchant Marine Act of 1970, overnight, will spring full bloom from the head of Zeus? I read a speech recently where some of the Maritime Administration people are now having great concern because shipbuilding under the Merchant Marine Act of 1970 is not moving. I understand the Go'den Eagle Co., will build two ships of 80,000 and Shell, three ships; they are small, about 38,000 tons.

Where are the rest of the ships under the 1970 act? Now it is a convenient thing to come in and say you don't need this bill, S. 3404 because the Merchant Marine Act of 1970 will cure everything. Don't you believe it. I am for the Merchant Marine Act of 1970. I testified for it. I give Mr. Gibson every credit for his initiative and the strength of efforts which he put into it. But tanker construction just isn't happening.

So let me conclude by saying don't be afraid of this bill. The Arab countries are already, without such a bill, moving to create their fleets. Other nations are moving in the same direction. If the large oil companies want to provide their future capital assets, be they refineries or be they shipping, construction of ships, whatever they may be, at the expense of American shipping, thus helping accumulate those dollars by operating huge foreign flag fleets, avoiding the American economy, avoiding American labor, avoiding American taxes, then that is one way to do it. I have the highest regard for these companies, but I think on this issue they are absolutely wrong.

I do not think this bill is going to have all of the disruptive results that they claim for it.

Mr. Chairman, I could go on and talk for a long while, but I will close and ask my colleague, Mr. Haddock, if he has any comment to make.

Senator SPONG. Thank you. Mr. Haddock?

Mr. HADDOCK. Mr. Chairman, I will reserve anything I have. We will try to work out a way to get our additional material in the record.

Senator SPONG. I don't want you gentlemen to feel impeded at all by the time situation. We will keep this record open and will expect to hear from you in the future if you think there is anything additional. Mr. Clark, we are accepting this statement in its entirety.

Mr. CLARK. I neglected to do that and I apologize to the Chair. We will file a full statement on S. 3404 herewith and I neglected at the beginning of my comments to mention this fact. I think we supplied you 75 copies for the witnesses and for the committee.

Senator SPONG. That will be received in its entirety. We thank you for your appearance here this morning.

(The statement follows:)

STATEMENT OF EARL W. CLARK AND HOYT S. HADDOCK, CO-DIRECTORS LABOR MANAGEMENT MARITIME COMMITTEE

Mr. Chairman and members of the Committee:

Our names are Earl W. Clark and Hoyt S. Haddock. We are Co-Directors of the Labor-Management Maritime Committee which is composed of major seagoing and shoreside unions and U.S. flag shipping companies in both the liner and tanker trades. We appreciate the opportunity to present our views on S.-3404.

S.-3404 is a bill to amend Section 901(b)(1) of the Merchant Marine Act of 1936 to provide a transport quota for U.S.-flag ships in connection with oil imports. We support this legislation. The need for such action was never greater.

Certainly, the growing energy crisis presents an exceedingly alarming picture. The full implications of which are just now dawning upon the American people. The greater our industrial development, the greater the demand for oil and its derivatives. However, its use has now gone far beyond the purely industrial process. Modern civilization would have been impossible without it, and the future of civilization appears contingent upon it. Our society is presently so constituted that no large or expanding population can properly survive without it. A modern nation's progress or decline is largely dependent upon it. Dominant nations of the future, as in the past, will be those who either (1) have oil in adequate quantity or (2) being deprived of it, are assured a continued supply from other sources. In the next few years, the United States will no longer be in the former category, and its position will progressively worsen. This compels attention to two fundamental responsibilities: first, the maintenance of successful politico-economic relationships with source nations and, second, the assurance of secure and continued transport to our shores. The latter responsibility is within the particular purview of this treatise. In terms of the current status of our U.S.-flag tanker fleet, it is an awesome one. .We have presented to each of the members of this Committee a treatise entitled "The Growing Energy Crisis and the U.S. Tanker Fleet" which contains the most detailed tabulations and analyses of data relating to this subject. We therefore will refrain in this testimony from unnecessary duplication of the material contained therein.

Our Domestic Resourses

Our domestic oil resources are limited and must be protected. They are being supplemented increasingly by oil imports. The original import quota of 12.2 percent of domestic production is being increased by rather extensive waivers to meet the demands of ever-increasing per capita consumption and, at the same time, conserve our domestic supply. It is estimated that by 1985 the national consumption of energy will almost double the amount used in 1970. This will call for even greater conservation of our domestic oil resources. The U.S. will not be able to meet its projected total energy needs from domestic sources even when the Alaska North Slope oil and gas are included. The production of oil and petroleum products from shale deposits and other oil bearing sands is not likely to solve or even appreciably reduce our demand for oil imports. The conversion of such deposits to usable energy is a costly process not yet perfected.

It is estimated that U.S. production of crude oil in 1985, excluding Alaska, will be 3,504.0 million barrels per year, or approximately 9.6 million barrels per day. This is less than in 1970. If we include estimated crude oil production from the North Alaska Slope, an additional 1,095.0 million barrels per year may be added. In either case, this will be most inadequate to meet projected demand.