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Records pertain to the Middle East Peace Process.
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ID # 174381 CU
6:45p.m. 9/12/90
WHITE HOUSE C0001-07
CORRESPONDENCE TRACKING WORKSHEET
O OUTGOING
H INTERNAL
I INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent: Ronald Peterson
MI Mail Report
User Codes: (A)
(B)
(C)
Subject: Dept of Energy draft testimeny
on Persian Galf Crisisand oil supply
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
CS
Office/Agency
(Staff Name)
Code
YY/MM/DD
Response
Code
YY/MM/DD
Cuoje
ORIGINATOR 90/01/2
C90,09,12
CS
Referral Note:
Cuat 17
A 90,09,12
C90,09,12
Cuator
Referral Note:
see comment CS
I 900912
-90109112
CS
Referral Note:
Cugray
I 90/09/12
C9010912
CS
Referral Note:
cuat19
I 900912
C90109112
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A . Appropriate Action
I - Info Copy Only/No Action Necessary
A Answered
C Completed
C . Comment/Recommendation
R - Direct Reply w/Copy
B - - Non-Special Referral
S Suspended
D Draft Response
S For Signature
F Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE:
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
NLO Jeff spokewith Mary Bennethum
directly No further action necessary. JRH/KRM
CS
7:30 pm on 9/12
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
RECORDS MANAGEMENT ONLY
CLASSIFICATION SECTION
No. of Additional
Correspondents:
Media:
Individual Codes:
Prime
Secondary
Subject Code:
-
Subject Codes:
-
-
-
-
-
-
PRESIDENTIAL REPLY
Code
Date
Comment
Form
C
Time:
P-
DSP
Time:
Media:
SIGNATURE CODES:
MEDIA CODES:
CPn - Presidential Correspondence
n - 0 Unknown
B Box/package
C Copy
n - 1 - George Herbert Walker Bush
D Official document
n - 2 George Bush
G Message
n - 3 George
H Handcarried
L Letter
CLn - First Lady's Correspondence
M Mailgram
n - 1 - Barbara Bush
O Memo
P Photo
n - 2 Barbara
R Report
n - 3 Bar
S Sealed
n - 4 - Mrs. Barbara Bush
T Telegram
V Telephone
CBn - Presidential & First Lady's Correspondence
X Miscellaneous
n - 1 - - Barbara & George Bush
Y Study
n 2 - Barbara & George
09/12/90
18:12
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6279
DEPARTMENT
EXECUTIVE OFFICE OF THE PRESIDENT
GERAL
OFFICE OF MANAGEMENT AND BUDGET
STATE
WASHINGTON, D.C. 20503
September 12, 1990
URGENT
LEGISLATIVE REFERRAL MEMORANDUM
DOI
TO:
Council of Economic Advisers (Obermiller
395-5036
242
Department of State (Rappaport 647-4463)
225
Department of Defense (Brick 697-1305)
325
Department of the Treasury (Carro 566-8523)
228
Dept Dest of
217
SUBJECT: Department of Energy draft testimony on Persian Gulf
Crisis and oil supply.
The Office of Management and Budget requests the views of your
agency on the above subject before advising on its relationship
to the program of the President, in accordance with OMB Circular
A-19.
A response to this request for your views is needed no later than
COB today, September 12, 1990 - hearing scheduled September 13,
1990.
Questions should be referred to Gary Bennethum (395-3634).
RONALD K. PETERSON for
Assistant Director for
Legislative Reference
Enclosures
CC: Ken Glozer
R. coyswel
C,B, Groy 100hn schmitg
WASHINGTON
ORM OPTICAL DISK NETWORK
ID# 174381cu Cu
Hardcopy pages are in poor condition (too light or too dark).
Remainder of case not scanned.
Oversize attachment not scanned.
Report not scanned.
Enclosure(s) not scanned.
Proclamation not scanned.
Incoming letters(s) not scanned.
Proposal not scanned.
Statement not scanned.
Duplicate letters attached - not scanned.
Only table of contents scanned.
No incoming letter attached.
Only tracking sheet scanned.
Photo (s) not scanned.
Bill not scanned.
Comments:
09/12/90
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DOE -PE-1
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STATEMENT OF
James Watkins, (Admiral, USN) Ret
SECRETARY OF ENERGY
BEFORE THE
COMMITTEE ON ENERGY AND NATURAL RESOURCES
United States Senate
September 13, 1990
Draft of 12 September 1990: 3:00 p.m.
09/12/90
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Mr. Chairman and members of the Committee, I am pleased to be
able to share with you our assessment of current oil market
conditions, and to discuss with you the energy measures that the
Administration is undertaking in response to the Middle East
situation.
The August 2 embargo of Iraqi and Kuwaiti export production
resulted in a loss to the world market of 4.3 million barrels per
day of oil. Since then, the market has been supplied by 011 on
the high seas, by some drawdown of commercial stocks, and by
excess production from Saudi Arabia, the United Arab Emirates,
Venesuela, and others.
While the full effects of the oil embargo will not be fully
evident until late September, we view the current market as
relatively stable, but uncertain about future supply. we are
closely monitoring the situation, and are in close consultations
with our allies and with the member-states of the International
Energy Agency (IEA). Should the situation warrant it, we are
prepared to direct a coordinated drawdown or the more than 1
billion barrels in strategic stocks held by the U.S. and by other
IMA states. The U.S. SPR drawdown capacity is 3.5 million
barrels/day. Other IEA members have combined capability of 2.0
million barrels/day.
09/12/90
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Coordination is key to strategic stocks drawdown. The world oil
market is highly integrated and as a consequence strategic stocks
placed into the market by one IEA nation will benefit all. since
benefits are shared, so should be the responsibility for use of
strategic stocks. This principle is appropriate and consistent
with the President's Middle Eastern policy.
The Iraq-Kuwait embargo took place coincidentally at a time when
world oil stocks were at very high levels. In the United States,
crude stocks in late July were about 50 million barrels above
last year's level.
Currently, crude oil stocks are 76 million barrels above minimum
operating inventory, and well above levels at the same time last
year. Gasoline stocks are tight, but adequate. Distillate
stocks are above normal. Propane stocks are 11.5 percent below
last year's level, but have risen significantly since June.
No are very concerned about the ability of refiners to continue
to operate at near maximum capacity for an extended period of
time. World wide refining capacity declined by 20% over the past
decade, with a disproportionate share of the capacity reductions
occuring in the United States and Western Europe.
2
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Consultations with industry and analysis of market information
auggest the problem in the short term is not necessarily one of
capacity, but of dislocations related to, quality, and
distribution of supply. In general, the crude production coming
on line to replace the lost Iraq and Kuwait production is
expected to be of lower quality, and we are more vulnerable to
events such as refinery accidents, transportation problems, or
bad weather.
Worldwide, excess production capacity is available to offset the
shut-off of Iraqi-Kuwaiti export production. A substantial part
of this excess capacity has been brought on line, but is
insufficient to fully offset the shortfall. For this reason, the
United States and its allies are taking steps to mitigate the
effects of the embargo by facilitating production of indigenous
supplies, by encouraging efficiency, and by maximizing fuel
switching.
The Administration on August 13 announced a first set of short
term measures aimed at reducing reliance on oil imports in the
laot quarter of 1990. These measures included: increased
Prudhoe Bay production; mediation of a dispute between producers
and California authorities over commencement of production at Pt.
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Arguello, off Santa Barbara; a request to Texas and other States
to increase allowable production in some fields; and a slight
increase in production from Elk Hills Naval Petroleum Reserve.
With the exception of Pt. Arguello, which cannot be brought into
production this year, most of these increases have been pledged
or achieved.
On the demand side, we will this week launch a National campaign,
under the sponsorship of the Advertising Council, aimed at
encouraging consumers to use energy more efficiently. This
initiative will seek the cooperation of consumers to take modest
individual stops that will collectively have a meaningful impact
on oil consumption; that will reduce energy costs to consumers,
and that, in some cases will likely also save lives. I have also
issued a notice to all Department of Energy operations directing
that they undertake all feasible action to reduce 011
consumption, switch to other fuels, and increase use of
alternative fuels.
Mr. Chairman, on Tuesday evening the President called on Congress
to enact this month legislative measures that would serve the
national interest by reducing our dependence on foreign 011.
These measures include:
4
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Incentives for Domestic 011 and Gas Exploration:
The Administration has included in the budget for the last
two fiscal years a temporary tax credit for new enhanced oil
recovery projects and for exploratory drilling expenditures;
elimination of the transfer rule; an increase in the
percentage depletion net income limitation; and a larger
deduction from income of exploratory drilling costs by
independent producers.
Impact of WEPCO on Fuel Switching:
The results of the WEPCO decision must be addressed
legislatively if we are to achieve the maximum achievable
and cost effective conversion from 011 to natural gas. The
Administration has proposed to Congress a provision to deal
with this issue in the context of the Clear Air Act
amendments. It is important that Congress act on this
proposal.
PURPA Size Limitations:
The Administration supports the removal of size limitations
on renewable energy technologies contained in the Public
Utility Regulatory Policy Act. The House and Senate have
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passed different versions of this legislation in different
bills. We are prepared to work with Congress to promptly
complete action on this legislation.
Treatment of Utilities' Energy Efficiency Rebates:
Utility rebates to residential consumers for investments in
electricity conservation were excluded from taxation by a
provision of the National Energy Conservation Act of 1978.
This exclusion expired on June 30, 1989. The Administration
supports a reinstatement of this exclusion for residential
consumers, and will submit a proposal for Congressional
action.
Titles I-III of the 1990 National Energy Policy Act:
The Administration supports key provisions of this
legislation, including those related to energy efficiency
technology transfer, and renewables. We are prepared to
work with Congress in a spirit of compromise to find common
ground in support of this Act's main objectives.
Environmentally Sensitive Exploration of ANWR:
The Arotic National Wildlife Reserve should be explored
initially for the purpose or estimating resources that would
be recoverable through environmentally low"risk options. In
6
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March of 1989, this committee approved a bill authorizing
exploration and development of ANWR. Similar legislation
was introduced in the House. The time has come to move
forward on ANWR.
Additional initiatives will be undertaken this week to obtain
further increases in oil supplies, greater efficiency, and more
fuel switching over the next 18 to 24 months. on the supply and
fuel switching side, these initiatives are aimed at cutting
through a number of regulatory bottlenecks that have prevented
reasonable and environmentally beneficial projects from coming on
line.
The President also urged that no one even contemplate
profiteering from the Iraqi crisis. Immediately after the
invasion of Kuwait, DOE issued a joint statement with the
Departments of Justice and Transportation expressing concern with
the recent increase in gasoline prices. DOE does not have the
authority to dictate oil prices, but does have the responsibility
to monitor and report market trends. The Justice Department is
watching for any indication of anti-competitive activity, which
will be met with vigorous antitrust prosecution. We are working
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closely with Justice and will share the results of our analyses
with them, as well as with Congress and the American people.
As the President noted on Tuesday night and on previous
occasions, "Conservation efforts are essential to keep our energy
needs as low as possible." To that end, we intend to set a
National example by requiring greater efficiency in Federal
energy use. We also intend to illuminate for private and
corporate consumers the idea that it 18 a matter of economic and
environmental self-interest to reduce waste and increase
efficiency.
Among these medium term measures are a few that merit particular
attention today. In Alaska, two projects on the Beaufort sea -
Niakuk and Pt. McIntyre - are awaiting final permits that would
assure 100,000 b/d of new production by the end of 1991. In
California, over 13,000 wells, currently shut-in, can be reopened
to production if the Kern River pipeline can be completed to
bring much needed natural gas for enhanced oil recovery. Heavy
oil production in California can contribute 100,000 B/D or more
to the U.S. supply.
Nearly three dozen natural gas pipeline projects are awaiting
approval by a variety of Federal and State agencies. These
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projects, whose approval can be expedited, have the potential of
backing out 55,000 b/d of oil by 1991; 300,000 b/d by 1992; and
nearly 600,000 b/d by 1994.
We are working actively with the Federal Energy Regulatory
Commission to identify those projects which can provide natural
gas to displace oil and to remove Federal roadblocks to their
approval. We are also working the FERC to streamline their
procedures for consideration of pipeline projects. In the final
analysis, however, it may be necessary to seek statutory changes
to insure that required environmental reviews and federal
permitting are completed within a reasonable period of time.
Mr. Chairman, this Nation has the material and technical
capability to reduce the vulnerabilities inherent in our
dependence on insecure supplies of imported oil. The response
measures we have been able to define and to promulgate in the
last 30 days, have been drawn from the important investment we
have made in the last year to develop a National Energy Strategy
(NES). It has been a fundamental tenet of the NES to craft
policy options that respond to the multiple goals of economic
productivity, energy security, and environmental quality.
The short and medium term measures I have discussed here today
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are responsive to those multiple objectives. If fully
successful, they will have the effect of reducing our 011 import
requirements by over 1 million barrels/day of oil equivalent.
This is substantially more than U.S. oil imports from Kuwait and
Iraq prior to the embargo.
It was in July 1990 that the President directed the Department of
Energy to develop the NES in close collaboration with other
Federal agencies. Just one year later, events have brought home
the message that complacency on energy issues is costly and
self-defeating. We have gathered fresh evidence that no part of
the American energy sector can be allowed to deteriorate, or
become less than fully productive, or rendered impotent by
regulatory deadlock. We must, as the President stated, take
advantage of all the energy resources - coal, natural gas, hydro,
nuclear and the full range of renewable technologies that are
available to the nation in part because of the substantial
investments we have made in Federal research and development.
The development of the National Energy Strategy has proven
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opportune. It has provided a framework for dealing prudently but
effectively with the present, unexpected situation. It will
prove even more useful for the longer term.
We are on schedule for the completion of the NES. We expect to
complete the remaining analytical work by the end of September,
and to develop a set of coherent policy options for the
President's consideration in December. I would add that the
inter-agency process that has been established for the NES has
proved effective in engaging the attention and cooperation of the
multiple Federal agencies involved in most aspects of energy
decisionmaking.
Nr. Chairman, I will close by stating that the current situation
in the Middle East will have an impact on the economy of the
U.S., and more severely on the economies of less developed
nations, including Eastern Europe. But it will also offer a
range of opportunities to craft long-range energy policies
grounded in reality and in common sense. The strategic task we
set for ourselves in June of 1989 will permit us to make
intelligent decisions for the future as it has for the present.
I hope you and the members of this committee will find it
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possible to support it. This concludes my statement, and I would
be happy to answer any questions.
12