It is a sad commentary that our Government has grown so timid, so frozen, so demoralized that it views as unthinkable the prospect of attacking problems that the Government itself has allowed, and sometimes actively encouraged, to reach massive proportions. At best, one suspects that behind this governmental paralysis lies anticipatory politics-the notion that vested economic interests are too powerful in the long run to be disturbed--and that consumers must therefore continue to suffer.

Now, with the Nixon administration came a new Chief of the Antitrust Division, Richard McLaren. Early in his tenure, McLaren was briefed on the Colonial case. He showed strong interest and asked the staff to prepare a new formal complaint. Like Turner, McLaren made no final commitment for or against bringing the case but, unlike Turner, McLaren was, according to one Division attorney, "a staunch and active supporter of the staff position with respect to the several pipeline cases under investigation."

As I have stated previously, that staff position was favorable to the bringing of these cases.

McLaren's attitude was made known through frequent informal discussions with the staff.

Very soon McLaren was given an opportunity to demonstrate his enthusiasm. In 1966 11 major oil companies were discussing a joint acquisition of the independent Texas Eastern Transmission Co.'s Little Inch refined products line. This ran from east Texas up the Mississippi River and through the Ohio Valley to Cincinatti. A northern spur to Chicago was to be added and the new pipeline would be called Gateway. However, the companies were unable to agree on which route the northern spur would take, and two camps were formed. One— called the "Match Group," consisting of Mobil, Indiana Standard, Texaco, Continental, and Jersey Standard-continued to focus on the Little Inch line. The other-Gulf, Shell, Sun, Phillips, Cities Service, and also Texaco and Continental of the Match Group-began making plans to construct jointly the Explorer Pipeline through Tulsa to Chicago.

It so happened that the Match Group companies had also entered into long-term contracts with Mississippi barge operators who had accordingly invested large sums in new barges and equipment. In late 1968 Mobil indicated to the barge owners that these contracts would not be honored in light of the Gateway development.

One of the barge owners and his friend, Senator Eastland, went to see McLaren to press for a suit to stop the Match Group's acquisition of the Little Inch pipeline."

McLaren viewed the case as smaller and much easier to handle than Colonial and also a clearer violation, since the joint acquisition of an existing line was involved rather than the divestiture of joint owners who had originally constructed a pipeline. He must have appreciated that the anticompetitive consequences of both situations were similar, however, for his game plan was to use Gateway as a precedent and a potential stepping stone to Colonial and other large, existing joint venture lines.

A copy of the barge owners' complaint to the Justice Department, submitted on September 13, 1968, appears below in appendix J.

Civil investigative demands were issued to the Match Group companies, a proposed complaint was drawn up and approved, and McLaren called a so-called "pre-filing conference." This is a standard operating procedure whereby the prospective defendants are informed that a complaint against them will be issued within a specified number of days unless they agree in advance to a consent decree which is then filed concurrently with the complaint.

At the prefiling conference, the oil companies objected vigorously, and no one, including McLaren, thought that they would back down. Indeed, the companies then petitioned Attorney General Mitchell for another conference. McLaren opposed the request, but he was surprised and upset when Mitchell ordered that the meeting be held in an unusual move. Present were Mitchell, McLaren, Antitrust Division Section Chief Joseph Saunders, and representatives of the five Match Group companies.

The prospective defendants complained not only about the Gateway venture, but also that the Justice Department was frustrating the construction of joint venture pipelines generally, although Justice had indicated in the past, they falsely maintained, that such pipelines were legal.

Mitchell did not relent on Gateway, and that particular venture was soon abandoned without the necessity of a suit being filed. But from that point on, however, in mid-April 1969, McLaren seems to have lost interest in pursuing joint venture pipelines cases. At the same time, he took no specific action to close the pending staff investigations. Civil investigative demands were issued to Explorer's owners in 1969, but Explorer is still "pending" 3 years later. Sometime around. July 1970 a proposed complaint seeking divestiture of Shell, Texaco, and Mobil from ownership in the Olympic Pipeline was sent up by the trial staff. It was last known to be in McLaren's office.

In the summer of 1971, Attorney General Mitchell vetoed formal Civil Investigative Demands against the joint owners of the proposed Trans-Alaskan Pipeline, forcing the Division to request Arco, British Petroleum, and Jersey Standard to submit information voluntarily. Just before leaving office in December 1971, McLaren sent the proposed Colonial complaint to the evaluation section where it was to continue its 11th year of review, a record in the annals of Government antitrust enforcement.

What happened to dampen McLaren's zeal? What happened in the 3 years since the Gateway hearings?

The possibility of political interference from above cannot be dismissed out of hand. One can only speculate whether the oil companies' abandonment of Gateway was a quid pro quo for cases not being filed against Colonial, Explorer, Olympic, and others.

One only speculates whether something less than a political consideration, perhaps an anticipatory political consideration, was involved and this would relate somewhat to the psychological fear that the task was too big, that the problems that we have in this country, such as problems of concentration in the economic sectors, cannot be solved because there are so many vested interests that no headway could be made.

This possibility of political interference is raised only because the public policy basis of the Antitrust Division's treatment of joint venture pipelines has been equally inexplicable.

The Glacier and Gateway cases the Glacier case was brought in the waning weeks of the Johnson administration-were aimed at preventing future economic concentration as distinguished from already existing jointly controlled pipelines. But certainly the Justice Department cannot use that distinction to excuse it in cases such as Colonial and Olympic where it failed to take action while the joint ownership patterns developed before its very eyes. And certainly there is ample legal precedent for the Government to break up existing monopoly if its origins were illegal.

Thus, one suspects that the Justice Department's policy rationale remains the distinction between a pipeline originally constructed by competing joint venture oil companies and a pipeline that becomes jointly owned through acquisition after being constructed by an independent company, by a single oil company, or by a smaller number of joint owners. But one must still wonder whether this rationale, which I have already suggested to be an invalid one on economic grounds, applies even to cases such as Olympic and Explorer, where there is clear empirical evidence that the lines could have been constructed by independent companies, or similarly to Colonial, where at most five instead of nine joint owners would have sufficed.

If so if this rationale does apply to the pending cases-why does the Justice Department not close the still pending investigations into these cases and stop wasting its staff's time and the public's money?

If, on the other hand, this rationale of avoiding disincentives to pipeline construction does not apply to these particular long-pending cases, why have they not been brought?

Although I have just now seen the Justice Department's prepared statement for the first time, I am particularly impressed by its failure even to mention the disincentive to pipeline construction issue, except for the observation that the Anitrust Division is not interested in prohibiting the construction of pipelines, and of course nobody is interested in that.

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All the Government does is to point out that the cases cannot ward until there is some real evidence of competitive injury. I do not forknow what they are looking for in addition to what they already have. Does the Government suggest that a particular businessman must come forward and show through his financial records that his profits or sales have declined by x or y percent directly on account of the Colonial pipeline?

This is certainly not the approach that the Antitrust authorities take in their prosecution of other merger and monopolization cases. Instead of attempting to ascertain exactly what has happened or will happen as a result of the merger, they look at the structural aspects of the industry, particularly the concentration levels before and after the merger, and on that basis, they decide whether the increased concentration creates a substantial probability that competition will be diminished. Per se tests are applied, based on general economic evidence, as was explained earlier.

It is true that in the 1950's, just after the Celler-Kefauver Act was passed, the Justice Department proceeded in merger cases by surveying or polling all the competitors in an industry where a merger was going to be or had been consummated. Each one of the competing companies would be asked their opinions of the competitive effect that the merger would have on it. It is precisely that kind of procedure which accounts for the fact that the Celler-Kefauver Act, passed in 1950, was a dead letter until the mid-1960's when numerous Supreme Court decisions gave it life.

Thank you.

Mr. HUNGATE (presiding). Thank you.

If you will remain at the table-will that be satisfactory-and we will proceed with Mr. F. F. Steingraber, president of the Colonial Pipeline Co., Atlanta, Ga.

Anyone with you?

He may join you at the table.

TESTIMONY OF FRED F. STEINGRABER, PRESIDENT, COLONIAL PIPELINE CO., ATLANTA, GA., ACCOMPANIED BY JACK VICKREY, VICE PRESIDENT AND GENERAL COUNSEL

Mr. STEINGRABER. I have Mr. Jack Vickrey, who is our vice president and general counsel. Mr. Vickrey does not intend to testify, but he is available to help us with any particular expertise that he might have in the area.

Mr. HUNGATE. Please be seated. We are pleased to have both of you with us. You have a prepared statement?

Mr. STEINGRABER. I have a prepared statement that I would like to read at this time.

Mr. HUNGATE. Without objection, that statement will be made a part of the record and you may proceed with it.

Mr. STEINGRABER. The Colonial Pipeline Co., incorporated in 1962, was built to help supply the large population centers of the South and East. It provides an efficient, dependable and economical means of transportation for vast quantities of gasoline, kerosene, home heating oils, diesel fuels, turbine fuels, and other refined petroleum products to a number of cities in the southeastern part of the United States as well as along the eastern seaboard in the Washington, Baltimore, Philadelphia, and New York Harbor areas.

The company is a common carrier regulated by the Interstate Commerce Commission and available to all shippers without discrimination. The system, prior to completion of the present expansion project, consists of some 1,540 miles of main line ranging from 30-inch to 36inch in diameter, 1,487 miles of lateral lines ranging from 6-inch to 22-inch in diameter, 10 source points, and deliveries to approximately 196 marketing terminals and interconnections with five common carrier pipelines.

Construction of the original system was completed early in 1965 with a capacity of 732,000 barrels per day. Initial shipments approximated 600,000 barrels per day. Less than a year later it was realized that additional capacity would be needed and early in 1966 a four-step expansion program was initiated, resulting in an increase to a level of 1,152,000 barrels per day.

To better serve all of its shippers and prospective new shippers, Colonial is presently completing a $124 million expansion program which will increase main line mileage to 2,000; lateral line mileage to 1,600; tankage to approximately 24 million barrels, and throughput capability from 1.152 million to 1.584 million barrels per day, or approximately double the original capacity. This expansion is expected to be completed by October 1 of this year.

Along the route of the main line there are 13 tank farms strategically located to receive products from the main line for further distribution into shipper terminals at those same locations and also to supply the various spur pipelines. These tank farms range in size from five to as high as 71 tanks. Because of the high rate of flow through the Colonial main line, delivery is made into this operating tankage for redelivery to shipper terminal tankage since the shippers' tankage is incapable of handling the high rates of flow. No tankage is provided by Colonial for storage holding or terminaling purposes.

Initiating pump stations through which we receive products into the system are located at Houston, Port Arthur, and Beaumont, Tex.: Lake Charles, and Baton Rouge, La., Collins, Miss. Through these initiating locations we receive products from 23 shippers with a total of 109 different grades of product, seven of which are handled on a fungible basis with the remainder handled on a segregated basis. Segregated service is provided for all gasoline products. Deliveries are actually made to 44 different companies off of the system. This comprises almost all of the companies with supply sources on the gulf coast and with marketing outlets in the Southeast and the mid-Atlantic States.

The Colonial system was carefully designed and engineered to exceed the requirements of all industry codes and Department of Transportation safety regulations, and in 7 years of operation has transported 2.7 billion barrels of essential petroleum products without causing a single death or harming the Nation's environment. Colonial utilizes the latest and most sophisticated computerized supervisory control system and fail-safe devices and continues to improve its system as technology advances.

The Colonial project did not emerge overnight. Such a pipeline had been under consideration for more than 20 years. Two earlier attempts to build a line to the east coast, one by U.S. Pipe Line Co. in 1951-52 and the other by American Pipeline Corp. in 1953-54, failed for lack of financing after obtaining steel allocations from the Petroleum Administration for Defense (PAD) and accelerated tax write-off approvals.

It is obvious that no pipeline extending from the gulf coast to the New York Harbor area could have been built by any one oil company, for no single company could have provided the volume of products necessary to finance a line of sufficient diameter to be economically feasible. Certainly a million-barrels-per-day line capable of competing with tankers could only have been financed and built as a joint venture by a number of oil companies.

Products lines do not lend themselves to speculative investment, and it can be expected that no oil company will undertake the substantial risks involved or obligate itself by a throughput agreement to ship over a line for a substantial number of years (up to 40 years in the case of Colonial) without an equity interest in the pipeline. Conse

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