From Crisis to Political Issue

ENERGY

From Crisi to Polictical issue

When the emergency energy bill was fed into the congressional legislative mills last October, President Nixon vigorously stressed its importance in helping the Administration meet the nation's fuel crisis. Last week the long-stalled measure won final congressional approval. But instead of welcoming the bill, the President now vows to veto it, leaving the nation's energy policy little advanced beyond where it was at the start of the emergency and transforming the problem of fuel shortages into what could be an explosive political issue.

The bill gives Nixon the sweeping authority he had requested to order nationwide gasoline rationing and a wide variety of other conservation measures. But the President, supported by the oil industry, objects to a provision that would roll back the prices of nearly 30% of the crude oil produced in the U.S. Primarily, that is so-called "new oil"-- the amount of crude produced in excess of 1972 levels--and it is now exempt from price control; prices have gone as high as $10.35 per bbl. The bill sets a basic price of $5.25, but permits increases up to $7.09 if oil firms can provide detailed cost justification for them.

At his nationally televised news conference last week, the President contended that the rollback would deepen gasoline shortages, presumably by discouraging oil companies from stepping up exploration and production. Supporters of the provision say that it would knock gas prices down as much as 4-c- per gal. and still give oilmen more than enough incentive to boost output--since the rolled-back price would still be higher than any prevailing before late last year.

Voting largely along party lines, the House passed the bill 258 t0151-- a margin insufficient to override a veto--after an impassioned plea by West Virginia Democrat Harley Staggers. "Do you want to go home and tell your farmers, your small businessmen and little plastic companies that you were down here trying to help them?" he asked. By passing the measure, the Democrats figured to satisfy angry demands from constituents that they do something to ease the energy pinch--and to pin political liability for killing the bill squarely on the President. Representative John Anderson of Illinois, a leader of the Republican opposition to the bill, declared that approval of the legislation "sets the stage for further partisan manipulation of the energy crisis."

Quick Rebuttal. The President seems ready to accept the battle. At his news conference, he went so far as to say that there is no longer an energy "crisis"--only a "serious problem" --and that nationwide gas rationing probably will not be needed. His views drew an immediate rebuttal from top Democrats such as Senate Majority Leader Mike Mansfield, who asserted that "the shortage remains and so does the crisis" and called for immediate nationwide rationing. Politics aside, the President seems badly mistaken on this issue. Z.D. Bonner, president of Gulf Oil's domestic operations, is convinced that gasoline supplies this spring will fall "on the order of 25% to 30%" below demand. Even the Federal Energy Office concedes that shortages in April and May could be "more critical" than in February.

Even so, a high FEO official now loyally maintains that the agency "can operate without the emergency bill" after all. The FEO'S line is that the mandatory oil-allocation law passed by Congress late last year gives the Administration the power to order gasoline rationing if it does prove inevitable --though one aide concedes that it would be helpful "to get the authority clearly spelled out," as it is in the emergency bill. Perhaps. But if the bill is vetoed and the veto is sustained, FEO Chief William Simon will be unable to make mandatory a host of conservation measures that the Government is now asking citizens to observe voluntarily, such as gasless Sundays and reductions in outdoor lighting.

A presidential veto would also leave up in the air the hot political question of what kinds of restrictions Washington will put on the oil companies. Though the companies seem likely to escape the price rollback, they, no less than the President, are coming under attack from several other directions. Last week the House Ways and Means Committee began work on a change in tax law that would limit the companies' ability to deduct from their U.S. income taxes all levies that they pay to foreign governments.

The committee is also considering ways to reduce the industry's controversial depletion allowance, which permits oil companies to deduct from taxable income as much as 22% of the value of the oil that a well produces.

In addition, the staff of the Federal Trade Commission issued a blistering report advocating nothing less than the breakup of vertical integration in the oil industry. The staff report called on the commission to insist that the nation's eight largest oil firms be forced to sell 40% of their refinery capacity and many of their pipelines. It contended that the ability of major companies to control wells, pipelines and refineries had reduced competition and that this situation contributed to inadequate refinery capacity, shortages and high prices. The claims are heatedly denied by the companies and may never be accepted by the courts or even by the FTC'S commissioners-- but they are another indication of the rising pressure on the oil firms.

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