S. 1246: The Oil Windfall Acquisition Act of 1979
(Preliminary Study)

Walter S. Measday

Chief Economist,
Senate Antitrust &
Monopoly Subcommittee

History of S. 1246

S. 1246, originally entitled, "The Energy Antimonopoly Act of 1979," was introduced in the Senate on May 24, 1979, by Senators Edward Kennedy and Howard Metzenbaum with eleven other cosponsors. [1]  People who follow Congressional activities will recognize the bill as an offshoot of S. 600, a more general merger limitation bill introduced by Senators Kennedy, Metzenbaum, McGovern, Melcher, and Pressler the previous March. S. 600 would ban flatly any acquisition of a $2 billion company (in terms of sales or assets) by another $2 billion company, and it would place some roadblocks in the way of mergers between $350 million companies. The bill's sponsors entitled it "The Small and Independent Business Protection Act of 1979."

As originally introduced, S. 1246 simply prohibited any "major producer" from merging with or acquiring a controlling interest in any other company with assets in excess of $100 million. [2]  The definition of "major producer" included any company with production of crude oil, condensate, and natural gas liquids totalling 35 million barrels or more in 1976. That date was chosen to remove Alaskan North Slope oil from consideration in the size determination on rather vague grounds that this production represented a positive contribution towards the country's energy goals.

The Judiciary Committee's Subcommittee on Antitrust and Monopoly, to which the bill was referred, held four days of hearings before reporting it favorably to the full Committee on July 11, 1979. Two amendments offered by Senator Max Baucus (Montana) were incorporated in the Subcommittee deliberations. One of these provided a definition of "control", lacking in the original bill, by establishing a rebuttable presumption of control where the acquisition involved l5 percent or more of the voting securities of another company. The second Baucus amendment was a "sunset provision" which would automatically repeal the Act on December 31, 1990; the Federal Trade Commission would be charged with preparing reports, in consultation with the Departments of Justice and Energy, in 1984 and 1989 on the impact of the legislation with any further legislative recommendations. Both amendments had been suggested in testimony of Alfred Dougherty, Director of the FTC's Bureau of Competition. [3]

The full Judiciary Committee conducted an additional seven days of hearings between July and October. On the basis of these hearings, the Subcommittee bill was extensively revised (and its title changed to the "Oil Windfall Acquisition Act of 1979") before it was favorably reported to the Senate on November 20.

The nature of the revisions may be briefly considered here. The original Energy Antimonopoly Act bill of May 1979, reflected primarily a concern over questions of increasing economic power and aggregate concentration, and secondarily a feeling that oil company profits should be spent looking for more oil. The Oil Windfall Acquisition bill of November reflects the same concerns but, in my opinion, in reverse order of priority. What occurred in the interval, of course, was a sharp increase in the world crude price which was paralleled by a widespread feeling of impotence within the United States so far as our own capacity to influence that price was concerned.

Thus, the Committee accepted a DeConcini amendment which retained the $100 million cutoff level for the acquisition of other energy companies by major producers, but lowered the level to $50 million in sales or assets for nonenergy acquisition targets.

Similarly, two affirmative defenses were adopted for acquisitions which would violate the limits. The first was to permit argument that the "likely" effect of an acquisition would be to "substantially enhance competition in the domestic or foreign commerce of the United States." The second defense, however, is that the likely effect would be "materially to increase or substantially to promote energy exploration, extraction, production, or conversion." The word "conversion" is used here to designate synthetic fuel production from coal, shale, tar sands, or biomass materials. Had the bill been law last year, for example, Shell Oil's $3.7 billion acquisition of Belridge Petroleum would have been defended—probably successfully—with the argument that Shell's financial and technological strengths would permit development of Belridge's heavy oil reserves more rapidly than could have been managed by the original owners.

Note that this second defense is an alternative, not a complement, to the first. The promotion of energy supplies is a sufficient defense even if an acquisition is unlikely to enhance competition.

As reported out of the Antitrust Subcommittee, S. 1246 was vague on the question of its applicability to foreign companies. In particular, it appeared that it would apply to foreign acquisitions by British Petroleum (with majority control in Standard Oil of Ohio) and Royal Dutch/Shell (parents of Shell Oil Company in the U.S.) Not surprisingly, the State Department received a formal protest from the United Kingdom over the extraterritorial application of U. S. law. Other protests were received from Canada and Norway. Thus, the revised version specifically limits application to persons incorporated in the U. S. and subject to SEC registration and reporting requirements.

The full Committee version also makes some changes in coverage. The original measure, as stated earlier, defined major producers in terms of 1976 domestic crude production, deliberately to exclude North Slope production. North Slope crude had a wellhead value (because of high transportation fees) of less than $6.00 a barrel in early 1979; no one expected that the value would rise by another $10 within a few months. The draftsmen of the original measure had focused upon the potential windfalls from decontrol of lower tier "old" oil; they were in possession of an internal company memorandum which showed that at the end of 1978 more than 85 percent of the nation's "old" oil was produced by the 16 companies which would have been covered. (Table I)

^* Companies covered by version of S. 1246 reported out of the Judiciary Committee, but not in the original version voted on by the Antitrust Subcommittee.

In the first hearing of the full Judiciary Committee on the bill, John Shenefield, then Assistant Attorney General in charge of the Antitrust Division, urged that the standard be altered to worldwide level of production in 1978. [4]  Specifically, the Justice Department recommended the inclusion of Standard Oil of Ohio (clearly a major producer, with roughly half of the North Slope oil) and Occidental Petroleum, with negligible U. S. production (hence, unlikely to benefit specifically from crude oil decontrol) but substantial foreign production. Thus, the version of S. 1246 reported out in November changes the major producer standard from roughly 96,000 b/d of 1976 U. S. production to a 150,000 b/d worldwide in 1978. A total of 18 companies are now covered by the bill. (See Table I.)

Finally, the 15 percent control standard for prohibited acquisitions adopted by the Subcommittee raised serious questions about the future ability of U. S. major producers to participate in joint ventures anyplace in the world. The final version of the bill, therefore, contains an exemption for major producer participation in joint ventures "for the purpose of new energy exploration, extraction, production, conversion, transportation, or distribution."

Future Energy Requirements

In the early 1970's, the American Petroleum Institute pushed a media campaign with a red, white and blue slogan: "A Country That Runs on Oil Can't Afford to Run Short." It is hard to quarrel with that message. In the years from the end of World War II through 1973, the economic growth of the nation was fueled by inexpensive energy, most of it coming from the petroleum industry. Domestic consumption of all types of energy rose from the equivalent of 15.6 million barrels of oil a day (hereafter abbreviated as "mbdoe") in 1948 to 35.4 mbdoe in 1973. The report of the Judiciary Committee on S. 1246 makes two points which are worth repeating with respect to that growth in energy consumption. [5]

First, nearly all (97 percent) of the 19.8 mbdoe increase was in the form of oil and gas. By 1973, oil and gas accounted for nearly 77 percent of domestic energy consumption, compared to less than 18 percent from coal, 4 percent from hydropower, little more than 1 percent from nuclear fuel, with insigificant "other" supplies such as geothermal and electricity generated by wood and waste combustion. [6]  Six years later, after two OPEC "crises" with sharply escalating world oil prices, it is clear that the petroleum industry's products, oil and gas, are still the mainstays of U. S. energy consumption. While the relative share of oil and gas had slipped by four percentage points to somewhat less than 73 percent of total consumption in the first nine months of 1979, the combined petroleum industry contribution was relatively unchanged with a rise in liquid petroleum consumption offsetting a decline in natural gas usage. The difference in percentage terms was made up by coal (up 1.6 percentage points) and nuclear fuel (up 2.6 percentage points), while hydropower continued to supply about 4 percent of our requirements and the "other" category was still insignificant despite a sharp growth in absolute terms.

The second point made in the Judiciary Committee report is that domestic energy production failed to keep pace with the expansion of energy demand. The shortfall was met by increasing imports of crude oil and finished products; by 1978 (and through the first nine months of 1979) foreign crude and products supplied 44 percent of the U. S.'s liquid petroleum consumption and well over 20 percent of total energy needs.

What of the future? In its 1978 Report to Congress, the Energy Information Administration presented a number of projections (scenarios, rather than forecasts) of future energy supplies. Four of these and an Exxon projection, all expressed in million barrels a day of oil equivalents, were shown in the Judiciary Committee report and are reproduced here, as Table II.

(millions of barrels per day oil equivalent)

¹ Exxon data adjusted to exclude coal exports.
² Total imports include coal, coke, and electricity imports.
³ Included in the value reported immediately above.

Source: Energy Information Administration. Annual Report to Congress, 1978, vol. 3, Table 4.23, p. 90; Exxon Co., U.S.A., Energy Outlook 1979-1990, December 1978.

All of those shown project total energy consumption in the range of 47 to 49 mbdoe in 1990, compared to less than 37 mbdoe in 1978 and 1979. [7]  All of them suggest that the relative decline in the petroleum industry's contribution to consumption from 1973 to 1979 will continue, with the oil and gas percentage dropping down to roughly 60 percent by 1990 (compared to 73 percent in 1979).

Significantly, none of the scenarios forecasts any absolute decline in oil and gas consumption. Use of natural gas is projected at about the same level as the current one; while only the DOE projections hold petroleum consumption to less than 20 million barrels a day (compared to a 1977-1979 average of 18.5 mbd). The PACE projection, at 21.3 mbd, is 15 percent above current levels.

Moreover, each of the projections shown requires substantial increases in nuclear and coal fuel use over this decade to hold oil and gas requirements down to the level shown. The range shown for nuclear (4.2 to 5.2 mbdoe) in 1990 is as much as triple the 1.4 mbdoe contributed in 1978. The coal projections for 1990 are from 70 percent to 109 percent higher than coal consumption in 1978. The impact of the incident at Three Mile Island may generate delays which will make any current 1990 targets for nuclear utilization impossible to achieve. And growing questions about coal utilization, from the simple mechanics of transportation capability to environmental problems (from acid rain to the emission of carcinogens) are likely to retard the growth in coal consumption. To the extent that nuclear or coal expansion is prevented or even delayed, of course, oil and gas consumption requirements will be above those shown in the projections. While synthetic fuels may begin to make a significant contribution in the 1990's, it is clear that conventional oil and gas will continue to occupy their primary position in U. S. energy requirements through the rest of this century.

Another aspect of the projections is the importance which continues to attach to imports. Only the two DOE examples project imports of crude oil and products at the current level (a 1977-1979 average of 8.6 million barrels a day); the three non-government models project rising imports by 1990. This is a disturbing possibility in a period when the governments of many oil-producing nations are exhibiting a growing willingness to use their oil exports for political ends.

It is of vital importance, therefore, that a broad range of policies be developed to carry us through the next 20 to 30 years of energy crisis. Conservation is important, and most praiseworthy, but it runs into diminishing returns rather rapidly; the EIA Series C (midrange) projection model, for example, forecasts a 15 percent decline in energy requirements per dollar of real GNP from 1977 to 1985, but a further decline of less than 5 percent from 1985 to 1995. Realistically, we must then look to supply-side policies.

Such supply-enhancing policies should focus on (1) locating and developing domestic oil and gas resources, (2) developing in an environmentally acceptable manner alternatives such as coal utilization, synfuels, solar and so forth, and (3) the greatest possible multiplicity of foreign sources for oil and gas to minimize the chances of serious supply interruptions by one or a few of those sources.

Parenthetically, let me note that I am not among those who have already written off domestic conventional oil and gas prospects. At the end of 1978, the U. S. had 28 billion barrels of proved crude oil reserves and 200 trillion cubic feet of natural gas reserves—nine to ten years' supply at 1978 production rates. These are the figures which are causing panic so far as the future is concerned, particularly in view of disappointing exploratory results in recent years.

In fact, there may be a good bit more oil to be found. Mr. Charles DiBona, of the American Petroleum Institute, while arguing against the President's crude oil equalization tax proposal, in 1977 predicted a fifty-year supply of oil and gas if the industry were allowed to put its profits back into domestic exploration and development. [8]  At 1977 production rates, Mr. DiBona was holding out the promise of finding an additional 115 billion barrels of crude oil and 750 trillion cubic feet of natural gas. The Judiciary Committee report on S. 1246 cites a number of other estimates in the same range.

Another promising avenue is technological improvements which will enable the industry to ptoduce hitherto unrecoverable oil.

Currently in the U. S., less than one-third of the oil in a reservoir, on the average, is recovered. At the end of 1978, known reservoirs had contained an estimated 453 billion barrels of original oil-in-place, of which some 146 billion barrels had either been produced or constituted the remaining proved reserves. [9]  In other words, we know the location of as much as 300 billion barrels more oil. Much of that oil may be lost for good, but if even 10 percent could be moved into the recoverable category, present proved reserves would be more than doubled.

In short, investment in discovering new domestic reserves and in improving the utilization of reserves we already know about may offer better payoff prospects than a headlong dash into some sort of a crash program for synfuels, windmills, power generation from ocean waves, and so forth.

The estimated investment requirements for near future domestic energy development vary according to the estimator, but all are in the high range. The Energy Information Administration's Series C (middle-of-the-road) scenario projects petroleum industry output in 1990 which is 3 percent over the 1977 level (but with natural gas down by 11 percent and oil up by 17 percent). The estimated capital requirements, 1979-1990, come to $366 billion (in 1978 dollars) including very minor amounts for refinery expansion and oil shale. [10]  The $30 billion annual average over the period may be compared to an average of $21 billion a year during 1976-1978. [11]  The oil and gas capital estimates may also be compared to EIA's projections in the 1979-1990 period of $63 billion for coal development, $28 billion for the nuclear fuel cycle, and less than $11 billion for emerging technologies.

On the other hand, Chase Manhattan's chief energy economist, James P. Wallace III, has testified that $350 to $400 billion must be spent between 1978 and 1985 alone (an average of $44 to $50 billion a year) to locate and develop conventional oil and gas reserves sufficient to maintain current production levels through the 1990's. [12]  It is significant, however, that Chase Manhattan's energy economics department believes that the reserves are there to be found.

The point of this discussion is that given the energy problems the country faces, there is still a need to spend enormous sums to develop conventional oil and gas, both domestically and abroad to the extent we may increase the variety (and potential competition) of foreign sources. We clearly must spend to develop coal utilization without sacrificing the environment. To the extent we fall short in these areas, we may have to move more vigorously to solve the problems associated with nuclear fuel use. And, finally, substantial commitments must be made in the next few years in the emerging technologies if we are to have the alternatives ready for a transition to primarily non-fossil fuel energy sources early in the next century.

The problem today, in short, is not whether or not there are energy investment opportunities available. Rather, it is finding the capital to finance the real energy investments which must be made to avoid disaster. This, I submit, is the logic which led a majority of the Judiciary Committee to vote out S. 1246.

Financial Resources of the Major Oil Firms

It is, of course, no news to anyone that the largest oil companies have prospered mightily from the world's energy problems. Table III (missing) shows the net incomes and cash flows during the 1970's for the traditional eight largest majors and for all 18 of the companies which would be covered by the provisions of S. 1246. It is worth emphasizing that cash flow is a far more important measure of what the industry can do than is net income; it is cash flow which determines what resources a company has, after dividends are paid, to internally finance corporate growth. The propaganda from the industry to which the public has been subjected in recent weeks—spurious comparisons between the rate of capital spending and net income—is almost meaningless. [13]

The figures are truly impressive. From 1970-72, net income of the entire group averaged $5.6 billion, while their cash flows averaged $11.2 billion. At the time these were considered large numbers. As crude markets tightened in 1973, well before the OPEC embargo, profits and cash flows began to soar. A new plateau seemed to be established in the years after the embargo. From 1974-75, annual net incomes averaged $11.3 billion and cash flows $21.7 billion, just about double the pre-1973 averages.

The turmoil in the world oil market triggered by the Iranian situation in the beginning of 1979 turned what had been scheduled as an orderly upward progression of OPEC prices of about 14 percent spread evenly over the four quarters of the year into skyrocketing chaos. Arab Light, the "marker" crude, was supposed to have risen from $12.70 at the end of 1978 to $14.54 in the fourth quarter of 1979; in fact, it reached $24 with Saudi Arabia trying to hold down the prices of the more militant OPEC members and in the face of spot prices which passed $40 a barrel.

The major oil companies may well have moved upward to still a new plateau in 1979. The net incomes of the eight largest were just short of $15.0 billion, while the group of eighteen reached $21.4 billion. Only scattered cash flow figures have been available so far, but they too are impressive. Exxon with a preliminary 1979 net income of $4.3 billion had a cash flow from operations of $7.7 billion. Atlantic Richfield reports net income of $1.1 billion and cash flow of $2.5 billion, Conoco $815 million in net income and $1.5 billion cash flow, and so forth. It seems clear that the group's cash flow in 1979 was in the $35-$40 billion range.

It is difficult to accept at face value the protestations of the major companies that they are making practically all of their money overseas. The generation of windfall profits within the U. S. as a result of OPEC pricing policies is clear enough. Price controls on oil and gas have restrained but certainly not prevented substantial price increases. The average wellhead price of crude oil in 1970 was $3.19 a barrel, while natural gas averaged less than 17 cents per thousand cubic feet. By December 1979 the average value of oil at the wellhead was about $17.50 a barrel, and natural gas was well over $1 per thousand cubic feet. Today the average for oil is closer to $20 a barrel. Posted prices for uncontrolled oil have already reached the $40 level—a portent of what we may expect as decontrol progresses over the next year and a half.

Throughout this period of rising prices, the public has been assured that higher prices for oil and gas are necessary so that the industry can maximize domestic supplies and minimize our dependence upon imports. Price controls, the original version of the crude oil equalization tax, the current windfall profits tax, have all been strongly opposed by the industry on the grounds that every cent is needed to provide energy sources for the future. Nothing is ever said about buying department stores, electric motor manufacturers, trucking companies, or London newspapers.

Two factors will work to raise cash flows substantially, possibly enormously, in the years ahead. One mentioned above is progress towards the decontrol of crude oil prices by October 1, 1981. The second is the upward movement of world oil prices over time.

It is risky to predict the course of future world oil prices or the impact on producer revenues. Perhaps the most popular estimate—or guess—today is that domestic producer revenues will rise by $1 trillion between 1980 and 1990. Similarly, the most popular guess is that the Conference Committee compromise on windfall profit taxation will leave producers with an additional $300 billion over the decade. Since the largest part of controlled oil today is produced by companies which would be subject to S. 1246, they will enjoy most of the windfall. [14]  The supporters of S. 1246 hope to channel that windfall into new energy production efforts.

I see little point in rehashing the arguments pro and con over the virtues of conglomerate mergers. Basically, the economic evidence appears to wash out. Professor J. Fred Weston would argue that this is reason enough not to interfere in corporate merger activity which is not otherwise unlawful today. Professor Dennis Mueller looks at it from the other direction: "The preponderance of empirical evidence which exists on the effects of corporate mergers indicates that they do not increase corporate profitability, do not improve stockholder welfare, do not improve economic efficiency." [15]  Therefore, merger activity may be limited at little or no economic cost while questions of other social concern are resolved.

While the revealed economic evidence on mergers is at least equivocal, some of us still have some deep concerns. I think that there are two very real economic problems with mergers, although the problems may not be demonstrable beyond the "anecdotal" level.

One of these is that mergers may be a sterile use of financial capital and resources at a time when real investment in the energy industry and in the economy is necessary. It is my impression, for example, that General Crude Oil was a well-run, efficient, large independent producing company at the time of its acquisition (February 1975) by International Paper; in the three years prior to that acquisition, General Crude returned better than 20 percent on stockholders' equity. International Paper paid $486 million in cash and notes for the acquisition. Last year Mobil bought General Crude for $800 million.

The sale to Mobil may have been beneficial to International Paper's stockholders—depending upon whether or not a bird in the hand is really worth two in the bush, where a crude producing company is concerned. It may be, too, that $800 million was, from Mobil's viewpoint, a reasonable price to pay for nearly lOO million barrels of proved oil reserves and over 300 billion cubic feet of gas, with some valuable exploration acreage. Perhaps Mobil decided that buying reserves was cheaper than locating and proving them de novo. But, the point is that Mobil's huge cash outlay here did not add one barrel of oil or one cubic foot of natural gas to the nation's energy reserves. It did not create new productive capacity of any kind. What for Mobil was the relatively risk-free acquisition of reserves was simply another transfer payment so far as the public good is concerned.

Of course, we don't know what happens to the funds received by the sellers in an acquisition transaction. What does International Paper do with the money it received from Mobil? I rather think that most of it went into International Paper's acquisition of Bodcaw, a closely-held forest products concern. Perhaps, through Bodcaw's original owners, Mobil's investment in General Crude will eventually filter down into real investment. I'm not sure how much any of us would be willing to wager on that outcome. There is too much chance that it simply keeps circulating around bidding up the values of existing assets, without creating any new productive capacity in the economy.

I would also suggest the possibility that a merger will put upward pressure on prices in any case in which the acquired company has more market power than a perfect competitor. This effect may be intensified when, as over the past couple of decades, there have been successive acquisitions involving the same assets.

In March 1979, for example, Reliance Electric Corporation completed its acquisition of Federal Pacific Electric from UV Industries for $345 million. [16]  We may take $182 million as UV's own investment in Federal Pacific—$175 million in 1978 year-end net assets (from UV Industries' Form 10K) and roughly $7 million paid by UV in excess of Federal Pacific's net book assets in 1972, when the latter company was acquired by UV. Federal Pacific earned $57 million before income taxes in 1978, for a comfortable 31 percent pretax rate of return on its parent's investment.

The same pretax income, however, would provide only a 16 percent return on Reliance's investment in Federal Pacific; to do as well as UV Industries had done in 1978, Reliance would have to boost Federal Pacific's pretax income to $108 million a year.

As we know, in May 1979, Exxon made a tender offer for Reliance, $72 a share for common which was then selling for $34.50 a share. After some delay generated by the Federal Trade Commission, Exxon consummated the merger in late December. The oil giant paid $1.2 billion—in cash—for a company with net book assets of slightly over $400 million, or less than $600 million in terms of the stock market's valuation of these assets.

It does not require any very elaborate model to predict the range of consequences here. If Exxon can manage the old Federal Pacific assets in 1980 as well as UV Industries did in 1978, Exxon's return on those assets will be only a fraction of that earned by UV. Alternatively, Exxon will have to quadruple Federal's 1978 earnings to earn the return achieved by UV Industries on the same assets.

Now, I am second to none in my admiration for the quality of Exxon's corporate management. But I submit that the Federal Pacific operation had been pretty efficiently managed by UV, if 1978 was anything like a typical year. Nothing that we have heard from the defenders of conglomerate mergers—in terms of replacing inefficient managers, economies of scale in management, or even managerial synergy—is very persuasive evidence that simply transferring ownership of Federal Pacific from UV Industries to Reliance Electric to Exxon in less than a year will work any magical transformation in Federal Pacific's earning capacity.

Rather, if there is any rationality in economics, there will be real pressures on the current managers of what was Federal Pacific to increase prices where they have any market power, or to eagerly follow the lead when competitors raise prices. I do not want to single out Exxon here. This is a problem which is as widespread as the merger movement itself. What makes it a more urgent problem today is the size of the premiums being paid for existing assets, premiums which make sharp price increases the only feasible way of avoiding disappointing rates of return from conglomerate activity.

Obviously, S. 1246 would put some new restraints on the freedom of corporate managers to make whatever investment decisions they choose. But the restraints are exceedingly limited. While the bill's supporters hope that it would channel more resources into domestic energy development, it does not prevent a major oil company from diversifying into any new industry if that company prefers to do so. Diversification may be accomplished either on a de novo basis or by toehold acquisitions. The bill simply closes off large acquisitions as an avenue in that direction.

Further, the bill does have a sunset provision; it would expire on November 20, 1991. And the legislative history is clear that one purpose of the Federal Trade Commission review (in consultation with the Departments of Justice and Energy) by the end of October 1984, is to permit the Congress to alter or repeal the Act well before the final expiration date. The Federal Trade Commission's big conference on merger policy last January indicated that a tremendous amount of new work is being done on mergers in the economics profession—on the social and political aspects as well as the purely economic characteristics. Certainly, a delay of large merger activity financed out of OPEC-stimulated windfall oil profits, while these questions are studied, is a reasonable step to take.

1. Cosponsors include Senators Bayh (Indiana), Bumpers (Arkansas), Cranston (California), DeConcini (Arizona), Eagleton (Missouri), Hart (Colorado), Leahy (Vermont), Levin (Michigan), McGovern (South Dakota), Morgan (North Carolina), and Riegle (Michigan).
   
   
2. The bill adds a new section 7(B) to the Clayton Act.
   
   
3. Subcommittee on Antitrust, Monopoly and Business Rights, Committee on the Judiciary, U. S. Senate, Hearings on S. 1246, Part 1, pp. 219, 220.
   
   
4. Ibid., p. 358.
   
   
5. U. S. Senate, Committee on the Judiciary, Report on S. 1246, Oil Windfall Acquisition Act of 1979, 96th Congress, 1st session, p. 7.
   
   
6. U. S. Department of Energy, Monthly Energy Review, December 1979, p. 6.
   
   
7. This is not necessarily a surprise. The four models from the EIA report, and probably Exxon's as well, use DRI's general economic model to derive their underlying economic assumptions.
   
   
8. "Carter's Energy Package Blasted by Oil Industry," The Washington Post, August 17, 1977, p. A-11.
   
   
9. API/AGA/CPA, Reserves of Crude Oil, Natural Gas Liquids, and Natural Gas in the United States and Canada as of December 31, 1978, p. 76.
   
   
10. EIA, op.cit., Table 7.3, p. 132.
    
    
11. Ibid., Table 7.1, p. 130.
    
    
12. Subcommittee on Antitrust and Monopoly, Hearings on S. 1246, Vol. 1, pp. 85-86, June 21, 1979.
    
    
13. Indeed, most companies make a truly misleading comparison between "capital and exploration expenditures" and net income, double counting exploration expenses which have already been deducted to arrive at net income!
    
    
14. For January 1980, the 18 companies subject to S. 1246 held more than 77 percent of "deemed old oil" receipts. While this is an amalgam of lower and upper tier oil, it is a very rough indication of the potential decontrol benefits to those companies.
    
    
15. Subcommittee on Antitrust & Monopoly, Hearings on S. 1246. Part I, p. 491.
    
    
16. The purchase agreement established the price at 6.9 times Federal Pacific's 1978 pre-tax earnings, with a minimum of $325 million and a maximum of $345 million.