President Carter's antitrust chief, Assistant Attorney General John Shenefield, is backing away from previous expressions of support for requiring major oil companies to divest themselves of interests in coal, uranium or related energy fields, as well as ownership of oil pipelines.
At hearings on Shenefield's nomination to the Justice Department post last August, he stated bluntly his personal viewpoint. "If I were a sitting Senator, I would vote 'aye'" on divestiture, Shenefield said in response to a question on oil ownership of other energy companies.
"What is disturbing is that while one particular merger may not be illegal, what one sees evolving over a period of time is a striking example of cross-ownership of energy sources," he said last August.
He also said "divestiture may be the only appropriate means" of preventing monopoly profits or restricted supply caused by producer ownership of pipelines that transport crude oil and oil products.
In testimony prepared for two separate hearings this week, however, Shenefield expressed a more cautious approach to pipeline ownership and said there is no "strong" case for legislation to restrict oil companies from engaging in other energy businesses.
"Oil companies do not appear to have the requisite market power in alternate fuels to make anticompetitive withholding of those fuels a reasonable danger.Neither does there appear to be a reasonable danger that market power in oil will be enhanced by a kickback from increased prices of alternate fuels," Shenefield told the Senate Judiciary Antitrust and House Interior Energy subcommittees yesterday.
The antitrust division chief said neither coal nor nuclear fuel are good economic substitutes for oil, that vast supplies of coal are available with relatively small increases in price and that revenues from alternate fuels for oil firms are "quite small" compared with oil revenues.
Existing antitrust law is adequate to prevent any oil company from acquiring "market power in alternate fuels" and no legislation now is needed, Shenefield concluded, echoing findings of a Justice Department report last month.
He thus dismissed oil industry critics who have warned that petroleum giants could have an incentive to withhold competing fuels from the market in order to protect monopoly profits in oil, or to increase prices of one fuel to cause demand and higher prices for another company-owned fuel source.
At the same time, Shenefield said the antitrust division will apply a stricter standard in reviewing federal coal leases to nuclear conversion and fuel fabrication companies, to prevent any coal market power from being supported by a "kickback" in profits from nuclear operations.
Specifically, the government will consider as an antitrust violation any coal lease to a nuclear firm with more than 10 percent of a revelant coal market.
A top Federal Trade Commission official agreed with Shenefield yesterday that total divestiture "does not appear to be the best response at this time."
But Alfred Dougherty Jr., director of the FTC's bureau of competition, told the joint congressional hearing that "the trend of oil company entry into uranium and coal has reached the danger point."
To make certain that no single oil firm gains an excessively large market share of an alternative energy source, Dougherty proposed a "cap" or ceiling on the amount of coal or uranium reserves that any one oil company could own.
The ceiling proposed would be an upper limit of 3 percent for oil firm ownership of coal or uranium reserves. Oil companies already are close to dominating uranium production and reserves and without a new government policy the oil firms easily could move into domination of coal, Dougherty warned.
Companies with large investments in oil and gas, which also control substantial amounts of substitute fuels, "may slow the pace of production of alternative fuels in order to protect the value of their oil and gas reserves," he added.
On pipelines, Shenefield said in separate testimony for the Senate Antitrust Subcommittee that the antitrust division supports a ban on ownership and operation of future pipelines by oil companies. He noted that the Carter administration has not taken a position on the issue but said "the benefits of prospective divestiture are great and its social costs small."
But, because of a "much clearer potential for disruptive effects," Shenefield said proposals to require divestiture of pipelines already owner by oil firms require "careful analysis." He suggested that Congress may want to consider a group of pipelines that have a significant market share for divestiture while allowing other oil company pipeline operations to continue.