[Federal Register Volume 65, Number 146 (Friday, July 28, 2000)]
[Notices]
[Pages 46427-46432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18965]


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DEPARTMENT OF COMMERCE

Bureau of Export Administration

[Docket No. 000717210-0210-01]
RIN 0694-XX13


Summary of Secretarial Report Under Section 232 of the Trade 
Expansion Act of 1962, As Amended, on the Effect of Imports of Crude 
Oil on the National Security

AGENCY: Bureau of Export Administration, Department of Commerce.

ACTION: Notice.

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SUMMARY: On March 24, 2000, President William J. Clinton reviewed and 
approved the Secretary of Commerce's finding that imports of crude oil 
threaten to impair the national security. The President determined that 
no action is necessary to adjust imports of petroleum under Section 232 
of the Trade Expansion Act, as amended, because on balance the costs to 
the economy of an import adjustment outweigh the benefits and that 
existing policies to enhance conservation and limit the dependence on 
foreign oil be continued. Such policies include, inter alia, proposals 
for additional tax credits to promote renewable, more efficient energy 
sources and further investments in energy-saving technologies and 
alternative energy sources. Included herein is the Executive Summary of 
the Department's November 1999 report to the President.

ADDRESSES: Copies of the complete report may be requested from: Bureau 
of Export Administration, Office of Administration, U.S. Department of 
Commerce, Room 6883, 14th and Constitution Avenue, NW, Washington, DC 
20230; (202) 482-0637. This component does not maintain a separate 
public inspection facility. Requesters should first view BXA's website 
(which can be reached through http://www.bxa.doc.gov). If requesters 
cannot access this, please call the number above for assistance.

FOR FURTHER INFORMATION CONTACT: Scott Hubinger, Senior Policy Analyst, 
Office of Nonproliferation Controls and Treaty Compliance, Bureau of 
Export Administration, U.S. Department of Commerce, (703) 605-4416.

SUPPLEMENTARY INFORMATION: On March 11, 1999, fifteen U.S. Senators, in 
a letter to the President, requested that he take immediate action to 
address the threat of increasing oil imports to our national security. 
Subsequently, on March 12, 1999, eleven U.S. Senators and a member of 
the House of Representatives, in two separate letters to the Secretary 
of Commerce, raised similar concerns and directly requested that he 
initiate an expedited review and investigation into the impact of low 
oil prices and ever increasing oil imports on the United States 
national security under the authority of Section 232 of the Trade 
Expansion Act of 1962, as amended.
    On April 28, 1999, the Department of Commerce self-initiated an 
investigation under Section 232 of the Trade Expansion Act of 1962, as 
amended, to determine the effects on the national security of imports 
of crude oil and petroleum products. The investigation focused on two 
issues. One, are imports of oil and petroleum products threatening to 
impair the national security of the United States and two, if a 
positive finding can be found that imports of crude oil and petroleum 
products do threaten the national security, is a trade adjustment, as 
provided for under Section 232, the appropriate means to address the 
threat?
    In conducting the investigation, the Department chaired an 
interagency working group that included the Departments of Energy, 
Interior, State, Treasury, and Defense, the Office of Management and 
Budget, and the Council of Economic Advisors. The Department and the 
interagency working group drew upon an extensive body of data and 
analyses on the current and prospective status of the domestic 
petroleum industry and the world oil market. The Department also 
utilized written comments solicited from and provided by interested 
parties in response to a Federal Register notice published on May 4, 
1999. In view of the extensive amount of interagency and public comment 
information available to it, the Department determined that an industry 
survey or public hearing was not necessary.
    On November 2, 1999, Secretary William Daley concluded his 
investigation and submitted a report to the President. While concluding 
that some improvements in U.S. energy security have occurred since 
previous investigations in 1988 and 1994, the Department found that 
petroleum imports continue to threaten to impair the national security. 
As in previous investigations, the Department did not recommend the 
adjustment of oil imports under Section 232 because the economic costs 
of such a move outweigh the benefits, but rather recommended continued 
efforts to achieve the policy goals set forth in the Department of 
Energy's April 1998 Comprehensive National Energy Strategy. The 
Executive Summary of the

[[Page 46428]]

Secretary's November 1999 report to the President entitled, the Effect 
on the National Security of Imports of Crude Oil and Refined Petroleum 
Products, is reproduced below.

    Dated: July 18, 2000.
R. Roger Majak,
Assistant Secretary for Export Administration.

Executive Summary

Introduction

    On March 11, 1999, Senators Domenici, Hutchinson, Inhofe, 
Nighthorse-Campbell, Roberts, Sessions, Crapo, Nickels, Murkowski, 
Craig, Burns, McConnell, DeWine, Brownback, and Bunning, in a letter to 
the President, requested that he take immediate action to address the 
threat of increasing oil imports to our national security. On March 12, 
1999, Senators Bingaman, Breaux, Landrieu, Conrad, Enzi, Lincoln, Lott, 
Dorgan, Baucus, Murkowski, and Burns, in a letter to Secretary Daley, 
raised similar concerns and directly requested that the Department of 
Commerce initiate an expedited review and investigation into the impact 
of low oil prices and ever increasing oil imports on the United States 
national security under the authority of Section 232 of the Trade 
Expansion Act of 1962, as amended. Representative Istook made a similar 
request.
    In their letter to Secretary Daley, the Senators quoted from a 1999 
survey by the Independent Petroleum Association of America, which 
alleged that, since November of 1997, 193,000 marginal oil and gas 
wells have been shut down with a loss in oil production of 360,000 
barrels per day. The Senators stated that 24,000 domestic jobs have 
already been lost in the oil industry and another 17,000 job cuts are 
expected. Finally, the Senators addressed the concern that low priced 
crude oil imports could lead to the permanent loss of a significant 
portion of the United States domestic oil production capacity and 
resource base.
    On April 28, 1999, the Department of Commerce self-initiated an 
investigation under Section 232 of the Trade Expansion Act of 1962, as 
amended, to determine the effects on the national security of imports 
of crude oil and petroleum products. The investigation focused on two 
issues. One, are imports of oil and petroleum products threatening to 
impair the national security of the United States? Two, if a positive 
finding is found that imports of crude oil and petroleum products do 
threaten the national security, is a trade adjustment, as provided for 
under section 232, the appropriate means to address the threat?
    Under Section 232, The Department has 270 days from the date of 
initiation of an investigation to submit a report of findings and 
recommendations to the President. Based upon an initiation date of 
April 28, 1999, the Department has until January 29, 2000 to complete 
its investigation and submit its report to the President.

Methodology

    The Department chaired an interagency working group that included 
the Departments of Energy, Interior, State, Treasury, and Defense, the 
Office of Management and Budget, and the Council of Economic Advisers. 
This report is based on a number of agreed-upon economic assumptions 
including, inter alia, crude oil price levels, U.S. crude oil reserves 
and production rates, economic growth rates, and inflation.
    In determining whether petroleum imports threaten to impair the 
national security, the Department reviewed key factors from the 1994 
investigation as a starting point to determine whether they improved or 
deteriorated. These factors include: (1) Domestic oil reserves; (2) 
Domestic oil production; (3) Exploration and industry employment; (4) 
Impact of low oil prices on the economy; (5) Current status of the 
domestic oil industry; (6) Oil import dependence; (7) Vulnerability to 
a supply disruption; (8) Foreign policy flexibility; (9) U.S. military 
requirements; (10) Status of OPEC; (11) Transparency of oil markets; 
(12); Breakup of the Soviet Union. The Department also reviewed new 
factors that have emerged since the 1994 investigation, including: (1) 
Temporary economic decline in East Asia; (2) Iraqi oil exports; and 
(3). Non-OPEC offshore drilling.
    The Department made use of the extensive data and analyses that 
were already available regarding the current and prospective status of 
the domestic petroleum industry and the world oil market. In addition, 
the Department reviewed the Department of Energy's Comprehensive 
National Energy Strategy, which, issued in April 1998, outlines five 
major energy goals of the Administration. In view of this extensive 
body of available data, the Department determined that an industry 
survey was not necessary. The Department also drew upon the written 
comments solicited from and provided by interested parties in response 
to a Federal Register notice published on May 4, 1999.

Review of Key Factors From the 1994 Investigation

1. Domestic Oil Reserves
    Since the 1994 investigation, U.S. proven crude oil reserves 
declined by an estimated 0.5 billion barrels from 23.0 billion barrels 
in 1993 to 22.5 billion barrels in 1998. The underlying physical 
reality is that the United States has already developed the bulk of its 
known and easily accessible low cost deposits and has decided against 
developing other geological prospects such as the Arctic National 
Wildlife Refuge and certain portions of the Outer Continental Shelf . 
The reserves base reflects the structural geological and geophysical 
reality, given present technology and economics.
2. Domestic Oil Production
    The production outlook remains essentially the same as in the 1994 
investigation. The United States is a high cost producer compared to 
other countries because it has already depleted its known low cost 
reserves. U.S. production of crude oil declined by 0.42 million barrels 
per day (MMB/D) between 1994 and 1998 (from 6.66 to 6.24 MMB/D) and 
fell below 6 MMB/D in early 1999. To offset this decline in production 
and increasing consumption, imports have increased dramatically since 
1994, rising by 1.64 MMB/D (1998 basis).
3. Exploration and Industry Employment
    The Department did find some change in U.S. drilling and in oil and 
gas industry employment between 1994 and early 1999. Levels of 
employment in the extraction industry varied from a high of 337,000 in 
1994 and a low in 1995 of 320,000, but increased again to 339,000 in 
1997 and 338,000 in early 1998. Industry commenters provided anecdotal 
information showing additional steep drops in employment and drilling 
activity during 1998 and early 1999 due to the oil price decline. In 
addition, Department of Labor statistics indicate a decrease in 
extraction industry employment starting in the last half of 1998 
(falling from 325,000 to 308,000) and continuing into 1999 (229,000 in 
January and 291,000 in February). However, the total footage of 
exploratory drilling, the number of well completions, and the number of 
rotary rigs in use for oil and gas exploration increased between 1994 
and 1998, albeit with significant variations from year to year.
    Low oil prices are not the only reason for the long term historical 
decline in industry employment, exploratory

[[Page 46429]]

drilling, and well completions. U.S. companies are drilling less 
because they have made substantial gains in total productivity by 
employing new exploration and drilling technology and by focusing on 
the most promising geological sites based upon improved geological 
science and technology. In addition, the high cost of off-shore 
exploration and drilling, where most of the domestic exploratory 
activity is occurring today, strongly favors the development and use of 
advanced seismic mapping and analysis techniques in order to maximize 
drilling productivity. Companies are also continuing to realize 
productivity gains due to improvements in operations management.
4. Impact of Low Oil Prices on the Economy
    The Department found that the economic consequences of low prices 
resulted in positive benefits to the U.S. economy. Because the United 
States is a net importer of oil, lower prices on balance helped the 
economy. The public benefitted from lower prices for transportation 
fuels and heating oil. For the economy as a whole, low oil prices 
contributed to a reduction in inflation, a rise in real disposable 
income, and an increase in the Gross Domestic Product.
5. Current Status of the Domestic Oil Industry
    Low oil prices starting in November of 1997 and continuing through 
early 1999 exacerbated the chronic cost-price squeeze problems faced by 
independent producers who account for the largest share of lower 48 
states oil production (40 percent). Consequences for the 7000 
independents who operate in the U.S. include: assuming more debt; 
scaling-down exploration activities; reducing their work force of 
skilled labor; and shutting-in temporarily or abandoning certain oil 
and gas producing wells.
    The impact of low oil prices is particularly hard on small 
producers operating stripper or marginal wells with an average 
production of 15 barrels per day or less. These wells, which represent 
over 300 million barrels of annual production, could be permanently 
lost during a sustained period of low oil prices and high operating 
costs.
    The Department's efforts to analyze the impact of the 1998 price 
decline on the smaller producers was complicated by the commenters' 
failure to provide specific economic and technical information. Various 
commenters argued strongly for the U.S. Government to provide financial 
incentives to smaller producers, but no company or trade association 
submitted economic and financial data regarding levels of profitability 
and tax burden under various oil price scenarios. Nevertheless, the 
1998 through early 1999 price drop, although temporary, did have a 
severe impact on marginal oil and gas wells and raised concerns about 
the ability of the United States to stabilize domestic oil production 
and to achieve its natural gas expansion goals. Since the November 1997 
price collapse, 136,000 oil wells are believed to have been shut-in 
(non-producing), representing about 24 percent of all producing oil 
wells. In addition, 57,000 gas wells are believed to have been shut-in, 
about 19 percent of all gas wells. This data is based on anecdotal 
information provided by industry (Independent Petroleum Association of 
America). Note: About 20 percent of the U.S. gas supply (``associated 
gas'') is associated with oil production and is therefore also impacted 
by low oil prices.
6. Oil Import Dependence
    The Department found that net U.S. imports have grown from 8.1 MMB/
D in 1994 to 9.7 MMB/D in 1998 and currently account for 51 percent of 
domestic consumption compared to 45 percent in 1994. Imports from 
Persian Gulf countries, which increased from 1.7 MMB/D in 1994 to 2.1 
MMB/D in 1998, currently account for 22 percent of all U.S. petroleum 
imports. The majority of U.S. imports, over 50 percent, are sourced 
from reliable Western Hemispheric countries such as Canada, Mexico, and 
Venezuela.
    The Department found that the energy provisions of the recent trade 
agreements between the United States and Canada have enhanced U.S. 
energy security. Specifically, Article 605 of the North American Free 
Trade Agreement (NAFTA) provides a number of reciprocal benefits that 
provide for energy security in the event of a supply interruption. 
These mutual benefits include: (1) Each country will not impose 
restrictions on the delivery of energy and basic petrochemical supplies 
during a supply interruption; (2) any shortfall in supply will be 
shared equally among U.S. and Canadian markets based on historical 
percentages; (3) each party will not impose higher export prices than 
those charged domestically; and (4) there will not be a disruption of 
the prevailing proportion of energy goods supplied, such as, for 
example, between crude oil and refined products and among different 
categories of crude oil and refined products. This unprecedented energy 
cooperation provides significant security benefits for both nations, 
and clearly demonstrates that the United States and Canada are 
developing an integrated and secure North American energy market.
    U.S. demand for imported oil is expected to continue growing 
because of declining production by high cost small producers, who 
account for the largest share of lower 48 states oil production, and 
continued economic growth. The Energy Information Administration of the 
U.S. Department of Energy (EIA/DOE) projects that, based on current 
forcasts, net imports should increase to 12.2 MMB/D by 2005 and account 
for approximately 58 percent of domestic consumption.
    To the extent that the United States and other countries import 
more oil in the future, EIA/DOE projects that they will turn 
increasingly to OPEC countries located in the Persian Gulf which have 
the largest amount of known low cost reserves and excess production 
capacity. The OPEC producers in the Persian Gulf region, representing 
42 percent of world crude oil exports in 1994, will account for 
approximately 49 percent by 2010.
7. Vulnerability to a Supply Disruption
    The Department found that unresolved socio-political and economic 
issues in some Persian Gulf countries increase the probability of 
future supply disruptions in the Persian Gulf region. However, the 
Persian Gulf's largest producer, Saudi Arabia, has pursued oil 
policies, including diversification of export routes and maintenance of 
considerable excess production capacity, that serve to mitigate some of 
these risks. Disruptions are possible in other regions, but the risks 
to the United States and other importing countries are comparatively 
less severe given the magnitude of Persian Gulf production and because 
oil production facilities elsewhere are not as concentrated as they are 
in the Persian Gulf.
    The capability of the United States and the OECD countries to 
offset a major oil supply disruption has not improved since 1994. The 
U.S. is still vulnerable because: (1) Most of the spare production 
capacity is still in the Persian Gulf region; (2) U.S. and OECD 
government oil stocks today provide less protection from an 
interruption than was the case in 1988 or 1994; and (3) There is 
currently no substitute for liquid transportation fuels which account 
for approximately two-thirds of all oil consumption in the United 
States. During a major oil supply disruption, there could be 
substantial economic austerity as a result of the decreased 
availability of oil. This, in turn, could pose a hardship for the U.S. 
economy.

[[Page 46430]]

8. Foreign Policy Flexibility
    In both the 1988 and 1994 investigations, the Department found that 
the dependence of our allies and trading partners on potentially 
insecure sources of oil might affect their willingness to cooperate 
with the United States during a major supply disruption. Some of these 
concerns are mitigated by the participation of the United States in the 
International Energy Agency (IEA), which groups together 24 members of 
the Organization for Economic Cooperation and Development (OECD). The 
principle purpose of the IEA is to fashion a collective response to 
energy emergencies, which may include the coordinated release of the 
emergency oil stocks that all IEA members are required to maintain. 
However, increased market share forecasted for some OPEC countries, and 
some Persian Gulf States, over the next 20 years, could make 
cooperation by some oil consumers more difficult.
9. U.S. Military Requirements
    The Department of Defense advises the Department that, under 
current planning scenarios, the United States will be able to meet both 
its direct and indirect military requirements for petroleum products in 
the event of two nearly simultaneous major regional conflicts or a 
major peacetime supply disruption.
10. Status of OPEC
    Low world oil prices are only partially due to the fact that OPEC 
members have been unable, until very recently, to coordinate production 
levels among themselves. The urgent financial requirements of some OPEC 
members has led them to compete for revenue and market share even if 
this has meant accepting a lower per-unit price for their oil. However, 
by mid-1998, declining prices set in motion renewed OPEC efforts to 
reduce excess oil supplies. For the remaining months of 1998, announced 
and realized production cuts were not clearly synchronized, and efforts 
to reduce production had only modest success. More recently, OPEC 
members have been more effective at reducing world production to 
increase prices. Ten members of OPEC, excluding Iraq, pledged in March 
1999 to cut production by 2.1 MMB/D. The compliance of these ten OPEC 
members with announced production cuts was about 89 percent in July 
1999. Oil prices have steadily increased since then due to these 
production cuts and stronger overall worldwide demand. The Department 
of Energy's Energy Information Administration projects that the cost 
for imported oil (Refiner Acquisition Cost) will be $22.50 and $23.50 
per barrel, respectively, for November and December of 1999 and average 
$21.85 per barrel in 2000.
11. Transparency of Oil Markets
    The growth of the futures market into a full-fledged commodity 
market has made crude oil prices more transparent and less subject to 
manipulation by foreign governments or OPEC. Prices are now determined 
by the New York Mercantile Exchange (NYMEX), the International 
Petroleum Exchange (IPE), the Singapore Mercantile Exchange (SIMEX), 
and other commodity markets. The use of computerized trading, options, 
and forward contracts has connected crude oil and refined product 
markets and suppliers more closely than was the case in 1988 or 1994. 
However, commodity markets, like all markets, are subject to volatility 
and have the potential to react in ways which can harm U.S. oil 
production.
12. Breakup of the Soviet Union
    The end of the Cold War and the breakup of the Soviet Union has 
reduced tensions around the world, including the Middle East. The 
advancement of the Middle East Peace Process has also contributed to a 
reduction of tensions in the region. Both of these developments have 
reduced the probability of a conventional war that could have 
jeopardized access to Middle East oil. In addition, oil production in 
the former Soviet Union, primarily in the Caspian Sea area, is expected 
to reach 7.6 MMB/D by 2005 and 13 MMB/D by 2020. Based on projected 
demand, the region could become a net exporter of oil at approximately 
7.9 MMB/D by 2020. These additions to the world oil supply and as well 
as reduced tensions in the Persian Gulf region help to assure that 
there will be stable supplies of oil and reasonable oil prices into the 
future.

Review of New Factors Since the 1994 Investigation

    The Department also evaluated several new factors which have or 
will significantly affect worldwide petroleum supply and demand since 
the 1994 investigation. Foremost among these factors are the following:
1. Economic Decline in East Asia
    An economic crisis in East Asia started in the summer of 1997 and 
continued to deepen throughout 1998. This, in combination with the 
already weak economy in Japan, significantly reduced worldwide demand 
for crude oil and petroleum products. The economic decline in turn led 
to sharply reduced worldwide oil prices in 1998 and early 1999 and a 
significant oversupply of crude. These factors contributed to the 
decrease in U.S. production seen during the same time period.
2. Iraqi Oil Exports
    As of August 1, 1999, the United Nations Security Council, within 
the framework of UN-imposed sanctions on Iraq (mandated by UNSCR 661, 
August 1990), has established the ``Oil-for-Food'' program ``as a 
temporary measure to provide for the humanitarian needs of the Iraqi 
people'' (UNSCR 986, April 1995). Thus, the United Nations Security 
Council, within the framework of UN-imposed sanctions on Iraq, allows, 
since February 1998, Iraq to export up to $5.256 billion worth of oil 
in a six month period, up from $2 billion per six month period prior to 
that date. Increased Iraqi oil exports, in total on the order of 2.0 
MMB/D, were among the supply and demand variables which led to 
appreciably lower oil prices for much of 1998 and early 1999. However, 
the U.S. supports UN efforts to meet the identified humanitarian needs 
of the Iraqi people and neither the U.S. nor the UN attempt to 
influence world oil prices or markets via sanctions regimes.
3. Non-OPEC Offshore Drilling
    Offshore oil exploration and production projects off the coasts of 
the United States, South America, Mexico, Eastern Canada, and Western 
Africa, and in the Gulf of Mexico, the Caspian Sea, and the South China 
Sea are expected to produce significant volumes of oil and natural gas 
early in the next century. Because drilling platforms are reserved so 
far in advance, most of the worldwide projects are proceeding on 
schedule even at relatively low oil prices. These increased sources, 
while harmful to U.S. domestic production to the extent that they 
increase world supplies and therefore possibly lower worldwide oil 
prices, increase U.S. energy security by broadening the mix of possible 
exporters beyond the control of individual countries or coalitions.

Conclusion

    Since the previous Section 232 petroleum finding in 1994, there 
have been some improvements in U.S. energy security. The continued 
erosion of external threats to the Middle East and the continued 
increase in non-OPEC production have enhanced U.S. energy security. 
Additional discoveries of both inland and offshore oil reserves outside

[[Page 46431]]

of the Persian Gulf region have at least slowed OPEC's market share 
growth.
    Lower oil prices on balance benefit the U.S. economy. However, 
reduced oil reserves, falling domestic production, and the relatively 
high cost of U.S. production all point toward a contraction in the U.S. 
oil extraction industry and increasing dependence on foreign imports. 
Growing import dependence, in turn, increases U.S. and OECD 
vulnerability to a supply disruption because non-OPEC non-Persian Gulf 
sources lack significant excess production capacity. Furthermore, there 
are at present no substitutes for oil-based transportation fuels.

Finding

    The Department finds that petroleum imports threaten to impair the 
national security.

Recommendations

    The Department does not recommend that the President use his 
authority under Section 232 to adjust oil imports. Ongoing programs and 
activities crafted by the Administration to improve U.S. energy 
security based upon other statutes and executive authorities are more 
appropriate and cost effective than an import adjustment.
    Section 232 requires the Secretary of Commerce and the President to 
recognize the close relationship between the economic welfare of the 
Nation and U.S. national security. As energy security affects the 
economic welfare of the United States, energy security must be 
considered in determining the effects on the national security of 
petroleum imports.
    The Department concurs with the conclusions of the 1994 and 1988 
studies that, on balance, the costs to the national security of an oil 
import adjustment outweigh the potential benefits. For example, an oil 
import adjustment such as a tariff could result in the loss of a 
significant number of jobs in many non-petroleum sectors. This, in 
turn, would reduce real Gross Domestic Product (GDP). An import 
adjustment would also diminish the competitiveness of our energy-
intensive export companies and strain relations with our close trading 
partners who would most likely seek relief under North America Free 
Trade Agreement (NAFTA) or World Trade Organization (WTO) rules.
    The Clinton Administration recognizes the importance of U.S. energy 
security. Since 1993, it has pursued the energy policy of reliance on 
markets to allocate resources with selective government intervention to 
ensure that certain highly valued societal needs--including the need 
for energy security, environmental quality, and energy research--are 
met. The policy recognizes that no cost-effective government action 
could eliminate U.S. dependence on foreign oil entirely, but that the 
following supply enhancement, energy conservation, and critical 
research policies help to preserve our current oil and gas productive 
capacity and limit that dependence. Accordingly, the Department 
recommends continuing the policy goals set forth in the Department of 
Energy's April 1998 Comprehensive National Energy Strategy as described 
below.
    Goal #1--Improve the efficiency of the national energy system by 
making the most productive use of energy resources, enhance overall 
economic performance, and protect the environment: The Administration 
is working to achieve a more productive and efficient use of energy 
resources, including electricity infrastructure, fossil fuel reserves, 
and productive capacity for clean alternative fuels. The twin goals of 
comprehensive electricity reform, as detailed in the Comprehensive 
Electricity Competition Act (CECA) submitted to Congress on April 15, 
1999, and increasing energy efficiencies in the transportation, 
industrial, and housing sectors and in the generation and distribution 
of electric power maximize the productive use of energy through market 
competition and technological innovation. When implemented, these 
measures will result in a more productive and efficient use of energy 
and a decreased U.S. consumption of oil.
    Goal #2--Prevent the disruption or decline of world energy supplies 
and protect the U.S. economy from the harmful effects of a short-term 
supply interruption or infrastructure failure: The Administration is 
continuing its strong emphasis on emergency preparedness efforts and 
the need to stabilize domestic oil production, including: arresting the 
decline in domestic oil production by 2005; maintaining the readiness 
of the Strategic Petroleum Reserve (SPR) to respond to threats of 
disruption in world oil supplies; making unutilized SPR storage 
capacity available for the mid-to long-term storage of commercial oil; 
coordinating responses to supply disruptions through continued 
cooperation with the member countries of the International Energy 
Agency (IEA); diversifying sources of oil by working with industry to 
increase the supplies of oil available to the world market; and 
ensuring the integrity of the oil and natural gas supply infrastructure 
with respect to emergency response capabilities.
    Goal #3--Promote U.S. domestic energy production and use in ways 
that respect national health & environmental values and improve public 
health and local, regional, and global environments: The Administration 
has pursued a balanced program to increase domestic energy production 
in an environmentally responsible manner by: supporting policies to 
allow the annual domestic natural gas supply to increase by as much as 
6 trillion cubic feet (2.9 MMB/D oil equivalent) by 2010; supporting 
research, design, and development to promote the use of advanced 
technologies to recover more oil and gas from existing reservoirs 
without environmental degradation; supporting the suspension, by the 
Department of the Interior, of production requirements for stripper 
wells producing less than 15 barrels per day on federal onshore lands 
when oil prices are extremely low (this suspension temporarily expired 
on July 26, 1999, when West Texas Intermediate (WTI) crude stayed above 
$15/bbl for 90 days); supporting the Petroleum Technology Transfer 
Council's ten regional centers and their December 1998 Industry Crisis 
Action Plan to teach independent operators strategies for improving 
cost efficiencies and identifying best practices; and accelerating the 
development and market adoption of environmentally friendly 
technologies through a combination of increased investments in 
research, development, and early deployment programs.
    The combination of increased natural gas utilization, the increased 
use of renewable electrical technologies, the accelerated development 
of biomass liquids fuel technology, and the recovery of more oil and 
gas from existing reservoirs and the preservation of those reservoirs 
will collectively reduce oil consumption and limit our dependence on 
imported oil.
    Goal #4--Expand future energy choices by pursuing continued 
progress in science and technology to provide future generations with a 
portfolio of clean and reasonably priced energy sources: Advances in 
science and technology are essential in terms of the United States 
achieving its economic, environmental and energy security objectives. 
Technological innovation can significantly decrease the domestic 
finding and development costs for natural gas and oil, thereby 
preserving and expanding the domestic resource base and improving the 
economics of extraction. These programs include: accelerating the 
advanced oil recovery

[[Page 46432]]

program; increased support for the natural gas supply program, 
especially for the new emerging resource program in methane hydrates; 
conducting basic research to provide the foundation for technological 
breakthroughs that are beneficial to energy development and 
environmental protection; and continued budgetary increases over 
current levels for technology partnerships with the private sector.
    Goal #5--Cooperate internationally on global issues and develop the 
means to address global economic, security, and environmental concerns: 
The United States should continue its active and sustained 
participation in multilateral and regional forums as well as bilateral 
contacts with key suppliers, such as our NAFTA partners Canada and 
Mexico, Norway, Nigeria, Venezuela, Saudi Arabia, and other major oil 
producers. Achievement of this objective requires: promoting the 
development of open, competitive international energy markets through 
U.S. participation in multilateral groups such as the International 
Energy Agency, the Summit of the America's Hemispheric Energy 
Initiative, and the Asian Pacific Economic Council (APEC) energy 
working group; working with our reliable neighbors in Canada and Mexico 
to establish an efficient and integrated North American natural gas and 
electricity system; promoting the development of worldwide crude oil 
and natural gas transportation networks to move South American, Caspian 
Basin, and Central Asian oil and natural gas, for example, to world 
markets to further diversify world energy supplies; and emphasize free 
trade and the promotion of American exports to help develop the world's 
free market economy and prevent over reliance on any single region of 
the world.

Other Issues

Regulatory Reform
    The Department of Commerce's Bureau of Export Administration (BXA) 
is in the process of reviewing its crude oil short supply regulations 
and identifying reforms that would allow U.S. firms to be on equal 
footing with their foreign competitors. BXA is reviewing a number of 
changes, including: (1) Creating a license exception to allow the 
export of crude oil to Canada and Mexico without an individual license; 
and (2) establishing a license exception to allow the export of 
California heavy crude oil sold, as part of bunker fuel oil mixtures, 
to foreign ships visiting U.S. ports. The interagency group recommends 
that BXA proceed expeditiously with its short supply reform package.
Industry Proposals
    During the review, the Department received comments from oil 
companies and trade associations about several possible modifications 
to the Federal Tax Code that the commenters believe would provide 
support for the domestic oil industry. The Department did not evaluate 
these proposals as part of its Section 232 investigation. Instead, the 
Department recommends that the National Economic Council evaluate the 
industry proposals.
[FR Doc. 00-18965 Filed 7-27-00; 8:45 am]
BILLING CODE 3510-JT-P