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Our interest is not in blocking approval and ratification of the FTA as a whole. However, we believe exports only should occur when they are in the national interest. At a minimum, the implementing legislation for the FTA should contain the same condition as in the omnibus trade bill. Moreover, the

Subcommittee in preparing report language for the FTA

implementing legislation should emphasize that this is a one-time exception for Canada, not a precedent for other nations to seek to exploit.

Mr. Chairman, you and Members of the Subcommittee know that the Administration has long been seeking to eliminate

restrictions on exports of Alaskan oil. As part of this effort, in 1985, the Economic Policy Council approved the export of small amounts of Alaskan Cook Inlet crude oil. At that time, Ambassador Yeutter stated on behalf of the Administration that ANS exports "would not be proposed to the Congress without a thorough analysis of all aspects of the issue." Following a

subsequent interagency review directed by the Department of Commerce under section 126 of the Export Administration Act of 1985, the Administration specifically decided not to ask Congress to permit such exports. Instead, according to its June 1986 report to the Congress, it decided merely to "continue to review the prospects for Alaska North Slope exports, in light of changing energy market conditions." Without such a review and without consulting your Subcommittee, our negotiators agreed to permit exports to Canada of 50,000 barrels per day under the

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FTA. Our concerns with the Administration's decision are

threefold.

First, the existing restrictions on ANS exports rest on longstanding policies of national security, energy conservation, and consumer interest. The importance of the restrictions is becoming increasingly evident as our energy dependence on the volatile Middle East continues to grow. Indeed, the United States is said by petroleum experts to be rapidly approaching the day when over half our needs will be supplied by foreign nations. It seems to us wrong to undermine our nation's energy security simply to advance the Administration's trade policy in one discrete area.

Second, permitting exports of 50,000 barrels per day, even if carried on U.S. flag bottoms, will have ramifications for national defense. Three more militarily useful tankers--12 percent of the independent tanker fleet in the Alaska trade--are likely to be forced out of work should 50,000 barrels per day begin moving to Canada. The vessels in the Alaska trade already face a declining market because of declining production on Alaska's North Slope and other Administration policies on the carriage of Alaskan oil. In recent years, under the combination of these policies and the protracted depression in world shipping, the United States has lost many tankers required for defense, and there is a recent shortage of seafaring manpower. Further losses imply a corresponding reduction in our military readiness--a problem of growing severity that has been well

documented in DOD studies, as well as the recently issued Report of the President's Commission on Merchant Marine and Defense. These losses also will be felt in the ports that service the vessels.

Finally, we are concerned that this opening will be used as a precedent for substantially expanding exports when the Export Administration Act comes up for renewal in 1989. As noted above, the Administration initially contemplated allowing 200,000 barrels per day of ANS exports to Canada under the proposed FTA. The Coalition fully expects that the oil export issue will be reopened in 1989. It is thus important for your Subcommittee to emphasize now that approval of the FTA implementing legislation does not constitute an endorsement of exports to Japan and other Pacific Rim markets.

Mr. Chairman, for all these reasons we do not believe exporting 50,000 barrels per day to Canada is in the national interest.

Recognizing this, Congress should provide Canada with access to this North Slope crude only on the condition that it be consumed in Canada and that an equal amount of Canadian crude be

delivered to the United States to maintain the net level of oil available to this country.

Thank you.

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On February 25, 1988, Deputy Secretary William F. Martin appeared before the Subcommittees on International Economic Policy and Trade and on Western Hemisphere Affairs of the Committee on Foreign Affairs to discuss the energy provisions of the U.S.-Canada Free Trade Agreement.

Following that hearing, you submitted a written question for our response to supplement the record. Enclosed is the answer to that question, which has been sent directly to the committee staff.

If you have any questions, please have your staff call Michael Gilmore on 586-4277. He will be happy to assist.

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Question 1:

Mr. Solarz:

Answer:

"Last year the Senate Committee on Energy and Natural Resources held a confirmation hearing on the nomination of Mr. Chandler L. van Orman as Administrator of the Economic Regulatory Administration. At the confirmation hearing, Mr. van Orman was asked by a Senator about the Federal Energy Regulatory Commission's open season to consider natural gas supply proposals to the Northeast. The Senator asked whether it made sense for the Economic Regulatory Administration (which is responsible for authorizing the importation of natural gas into the United States) to withold such authorization action on pending import applications until such time as FERC makes a decision as to which, if any, should be certified.

In his response to the Senator, Mr. van Orman stated that, 'in making its determination as to the competitiveness of and need for an import arrangement, it is not necessary for the ERA to wait until the FERC makes a decision regarding the expansion of the supply grid. In fact, in considering the merits of proposed facilities for transporting imported gas, it should be beneficial to the FERC to know whether there is a competitive source of supply available. The ERA does not intend, nor does FERC take the position, that an ERA authorization prejudges the transportation decisions to be made by the FERC pursuant to Section 7 of the Natural Gas Act.

Mr. Martin, I agree with the statement Mr. van Orman made in response to the question posed to him at the confirmation hearing. The ERA authorization should not be held up pending action at FERC. Do you agree with the statement made by Mr. van Orman?"

I fully agree with Mr. Chandler L. van Orman's statements in his confirmation hearing. The Economic Regulatory Administration authorization only allows a Canadian importer to bring gas

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