Equally, I think they are disturbed by the lack of political leadership in this area. We aren't really facing up to the hard political choices.

MS. PETERSON. I think that is true having just come from a meeting in Detroit, where I talked with some of these people. There is such a tendency not to listen to the messages that are coming from the people and from the marketplace. I think one of the great arts of leaders is to have a sensitivity to these signals. I think this is one case that the thread runs through, Senator, and you indicated that by saying that it should be equitable.

Senator MATHIAS. It must be equitable. There is no question, it must be equitable.

MS. PETERSON. It really must be equitable. They say all over, it is not equitable if we find that we are raising the price of these things and then we are finding they are buying department stores. I think I get questions about this just as much as about anything as I travel around. Consumers ask me, "What is fair about this, Mrs. Peterson?" It isn't that they don't want to do something about it.

I think our people are great. They will respond to it if we can move it to that. When you talk about what we talked about before, the bill is not so serious for them because they can diversify. There is a possibility under the bill for them to move into the areas where they could do well.

Senator MATHIAS. I think it is extremely important that the message get out from Government, are we really ready to do serious things at the national political level.

MS. PETERSON. Yes.

Senator MATHIAS. I am afraid that message hasn't reached MainStreet America yet. That is disturbing to me.

Ms. PETERSON. It is up to all of us to see that it does. We should make a genuine effort to do that.

Senator BAYH. What you emphasize in your statement I think is like a lightning bolt. I think most of the people in the country are willing to make sacrifices, and to create special incentives. if need be, to give corporations an incentive to go out and discover more energy. I know that they are willing to do that.

MS. PETERSON. If they are willing to do that.

Senator BAYH. But, then, when the people find that these moneys that corporations invest as a result of the special incentive programs, instead of being reinvested in petroleum, is being invested in aluminum companies, circuses, retail chains, and so on, then the people wonder what is going on. I think that is a matter of legitimate concern.

MS. PETERSON. Reinvestment in those areas has really no economic value for our problems of the moment. It isn't that they are creating new jobs; they are just taking on more acquisitions. I think that is what bothers them; and with the unemployment situation like it is, if there is imagination in trying new areas, moving in areas where there could be more competition that would really have an economic base within reason, for our state of economy the people would buy. They would buy rather than make acquisitions, which is a takeover rather than something that stimulates more economic development. I think that is very serious. I hear that from them a great deal. Why buy something that is already established? Use it for a new purpose, for a new exploration.

Senator MATHIAS. Could I just

Senator BAYH. Why don't I yield to the Senator from Maryland. I think Ms. Peterson pretty well answered my questions in her statement. Senator MATHIAS. Well. I have a real life case that disturbs me. It is in the press a good deal today. I don't know how this bill would impact on it. Maybe I should address this question to the chairman or to counsel rather than to our distinguished witness. But let me lay it on the table.

There is a company somewhere in the Southwest, perhaps Texas, called Bodcaw. There is a much-publicized bid for that company made by Weyerhaeuser and by Mobil Oil. Now, as I understand, it is a very complex thing, and the sale has come to public notice for antitrust reasons other than the fact that Mobil Oil is involved. Mobil Oil's interest is in the mineral rights that are involved in Bodcaw's holdings. Weyerhaeuser is interested in the paper, the cardboard side of the business. Now, if we assume that everything else is legitimate, it would appear to be in the consumer interest that Mobil could participate in this kind of a transaction, if their interest is in energy alone. That is a big assumption. I don't know that. But would this bill be in the consumer interest if it prevented Mobil from participating in that kind of a complicated transaction directed at the most efficient acquisition of a source of oil exploration? I don't know.

Ms. PETERSON. I don't either. I would certainly hope that would be looked at carefully by the experts. I am not sure that I would agree that it would be in the consumer interest.

Senator MATHIAS. I don't know.

MS. PETERSON. I don't know.

Senator MATHIAS. Obviously what could happen is that Weyerhaeuser or some other purchaser could buy Bodcaw and then could resell the mineral rights. But I would assume that they would want to make a profit on going through that process. They would have to put up a lot of capital to do it, and they would want to be rewarded for that exercise.

Senator BAYH. Could I make one observation here? This is a very technical question for us. Ms. Peterson might feel competent to answer that.

Senator MATHIAS. I am just wondering where the consumer comes out. I don't know.

Senator BAYH. If you look at the bill, specifically the bill would prohibit Mobil from buying up the corporation, would not prohibit Mobil from doing what Mobil usually does in a situation like that; namely, leasing the right to drill for oil.

I mean neither Mobil nor the major oil companies buy up the land on which they drill.

Senator MATHIAS. They buy mineral rights?

Senator BAYH. Yes.

Senator MATHIAS. That is what is involved here.

Senator BAYH. To answer your specific question, they could buy the mineral rights under S. 246. That would not be prohibited by our bill. The way I understand this merger, they want an equity in the company, not just the mineral rights. The bill would not prohibit them from purchasing mineral rights to drill for oil. We want to create an additional incentive to do that.

Ms. PETERSON. It is complicated. I just want to be confident that the consumer interest is considered at in every one of these cases.

Senator BAYH. Are there further questions or should we move on to the next witness?

Senator MATHIAS. It looks like we will have to move on to the floor of the Senate.

Senator BAYH. We have a little action over there. Thank Peterson. We appreciate it.

Ms. PETERSON. Thank you.

Ms.

Senator BAYH. Why don't we get started with our next witness and go as long as we can and then we may have to suspend briefly.

Dr. Frank Collins, consultant, and L. Calvin Moore, legislative director, for the Oil, Chemical and Atomic Workers International Union. STATEMENT OF DR. FRANK COLLINS, CONSULTANT, AND L. CALVIN MOORE, LEGISLATIVE DIRECTOR, OIL, CHEMICAL AND ATOMIC WORKERS INTERNATIONAL UNION

Dr. COLLINS. For the record, my name is Frank Collins, consultant on energy to the Oil, Chemical and Atomic Workers International Union.

Accompanying me is L. Calvin Moore, OCAW citizenship-legislative director. OCAW represents approximately 180,000 workers in the oil, gas, and nuclear industries and in the energy-intensive petrochemical and other related industries. We thank you, Mr. Chairman, for the opportunity to present our views at these hearings.

OCAW regards the Energy Antimonopoly bill S. 1246 as one of the most vitally needed pieces of legislation submitted to this session of Congress.

Following the quadrupling of OPEC prices in 1973-74 and then the 50-percent increase of these prices this year, there have been inordinate increases in the profits of the major oil companies. For the 16 major oil companies since the deregulation of crude oil and probable additional increases of OPEC prices, even more rapid growth of company profits in the coming years may be expected.

The windfall profits tax, now making its way through Congress, will at most yield the Treasury only about 25 percent of the profit increases due to deregulation because the windfall profits tax, as presently proposed is an excise tax, deductible as an ordinary business expense. This deregulation of domestic crude oil prices will add more billions in retained profits to the coffers of the major oil companies.

The uses made of these enormous profits are of crucial importance to this country at a time when we are beset by insecure and high-priced crude oil supplies and uncertainties about our energy future in general. Senator MATHIAS. That is the "hurry" bell. I will ask you to continue with your prepared statement. The chairman will return in just a minute or two. You will continue for the record with your prepared statement.

Dr. COLLINS. Yes. All right.

Senator MATHIAS. Just proceed.

Dr. COLLINS. The central case that the major oil companies are making for crude oil price decontrol without windfall taxes is that the

additional revenues are needed for increased exploration and development of domestic crude oil.

Yet, having endlessly repeated this argument, these same companies are cynically investing billions in the acquisition of other companies in lines of business that are unrelated to the production of crude oil.

The major oil companies also say that additional revenues are needed in order to finance the modernization of domestic refineries required to handle heavy high-sulfur crudes now available from Alaska and at discount prices from overseas. Modernization of refineries is also required to produce the larger amounts of unleaded gasoline needed because of the ban on tetraethyl lead as a fuel additive in new cars. Surely, action is required to assure that oil companies utilize their profits for the purposes that the oil companies themselves say are vital. Beyond the necessary goal of helping to promote the development of new oil resources in this country, the Energy Antimonopoly bill is needed to counter the dangerous concentration of economic power in the hands of the few enormous oil companies.

One of the primary acquisition targets of the major oil companies has been the nonoil energy industries: coal, uranium, solar, and geothermal. While the acquisitions of the other energy industries by the oil companies are by no means complete at the present time, continuation of mergers can easily lead to the complete domination of the whole energy industry by the oil majors.

It is elementary economics that the primary goal of corporate operations is the maximization of profit. The complete oligopolistic control of the total energy industry by the major oil companies would serve the goal of maximizing their profits but it would be at the detriment. of the American public.

Interfuel competition should be a countervailing influence tending to restrain coal and uranium price increases that would lessen the competitiveness of these fuels with oil.

The lack of real interfuel competition would have two undesirable effects: higher costs for the consumers of coal and uranium and continuance of high oil consumption levels as against alternative fuels. Interfuel competition has already been reduced as is shown by the fact that coal and uranium prices have tracked OPEC oil prices since the 1973-74 oil price increases. Were the major oil companies allowed to continue their policy of acquisition of large assets in other energy areas, interfuel competition could be well completely extinguished.

The extension of oligopolistic control of all nonoil mass energy industry by the major oil companies would have another very serious effect. That is, the development of alternative energy sources could be "programed" by the major oil industry so that they would be phased in in a way to insure maximization of profits.

This would mean continuation of the consumption of oil at present levels rather than the early substitution of other fuels, if this course were believed to lead to higher profits for the major oil companies. Higher profits would dictate the course of action whether it accorded with the energy policies of the Government or not.

Many of the other companies being acquired by the oil giants are in completely unrelated lines of business: retail marketing, minerals, medical supplies, electrical equipment, to name a few.

The entry of the major oil companies into these unrelated lines of business will, to some degree, restrict competition in these industries. Oil companies are heavy purchasers of materials and services. If a given material or service is available in a subsidiary, it is normal corporate practice to buy from one's own subsidiary rather than from outside supplies, thus reducing competition in the industry.

The principal problems arising from the growth of vast conglomerates by the major oil companies are perhaps the social and political ones. Never before has so much raw industrial and economic power been concentrated into the hands of a few individuals with little accountability. The corporate officers are responsible only to the board of directors of the given corporation.

Even here, in practice, the responsibility may be limited as was illustrated by the acquisition of 34 percent of Becton-Dickinson for $300 million by the chief executive officer of the Sun Co., without the full concurrence of the board of directors.

The degree of participation of the thousands of rank-and-file stockholders in the election of officers and in corporate decisions is almost nil, as any study of the proxy system and stockholders' meetings will reveal. The participation of the general public in corporate decisions is, of course, zero.

The building up of even larger economic units by the major oil corporations under the circumstances of an energy crisis extending into the long future intensifies the danger of divergencies between parochial oil industry interests and interests of the general public.

The enormous financial resources of the major oil companies represent a source of great political power. By reiterated paid statements in the news media, these companies can present their economic and political views to the general public far more extensively than is possible with the unpaid coverage given by these media to policy statements by the administration, by Members of the U.S. Congress, and by public interest groups.

The Energy Antimonopoly bill does not provide for divestiture, its provisions apply to only the 16 largest oil companies and it excludes only acquisitions of companies with assets over $100 million. It provides only the irreducible minimum steps that must be taken to curb the growth of oligopoly in the energy industry. OCAW firmly supports this bill.

Both Calvin Moore and I will try to answer your questions about our position on this bill. Thank you very much.

Senator BAYH. Thank you Dr. Collins. I apologize for the bouncing ball routine here this morning where Senator Mathias and I have had to try to be at two places at once.

Let me just get to one of the basic questions. Your people work in the industry that is responsible for developing and making energy available to us, do you not?

Dr. COLLINS. That is correct. We also have 180,000 consumers as members. So our interest is in the interest of developing better energy supplies and also, as consumers, that costs be as reasonable as we can get these days.

Senator BAYH. I guess I wanted to ask just from a-and I know your union does not take this solely self-center perspective in solving