PHILLIPS' PRIVATE WAR ON POVERTY

...Keeler, unlike most of the corporate upper crust at Phillips, is a Democrat, but his closest tie to the poverty sector proably is his role as principal chief of the Cherokee Indian nation...

...It is further contended that the system has helped to sustain the price of domestic crude oil against the encroachments of foreign competition...

...Once the decision to aid Puerto Rico with increased oil imports had been made, Interior could then have invited competitive offers and made a selection at arm's length, their argument runs...

...The case was being considered at the highest level for many months...

...Was the project awarded on a bid basis...

...It has been unofficially estimated in some government quarters that the value of the gasoline brought in from the Puerto Rican refinery would fall somewhere between $20 million and $40 million annually...

...The import control system was launched in the name of national security and the protection of the domestic oil producers...

...we have really no other proposals...

...But the Phillips decision, as nothing in recent years, cracked open the veneer of oil industry consensus...

...The free enterprise-minded oil industry has embraced the program as part of the natural order that also encompasses the 27.5 per cent depletion allowance and tanker subsidies...

...But the Administration did not choose that path...

...Udall announced...

...This is a substantial contribution to the national security," asserted Learned...

...At Udall's side during the press conference was beaming Puerto Rican Commonwealth Governor Robert Sanchez Villela, who hailed the plan as a great economic boon to the industry-and-job-hungry island...

...Interior officials are unable to cite any statutory levers that can be used on Phillips in the years ahead...

...Udall too asserted at the press conference that "the President was not involved in the decision in any way...

...The criticism that Udall predicted did indeed gush forth at hearings last month on the oil import program...

...Secretary Udall indicated initial consideration would be given by Department officials to a 'highly promising' proposal by the Phillips Petroleum Company," the release said...

...The Oklahoma-based oil company would be getting the product equivalent of an East Coast refinery pumping out nearly 25,000 barrels of finished gasoline a day—converted exclusively from cheap foreign crude oil...

...Nowhere have the details of the second and third stage developments been spelled out, but the overall scheme envisions a 2,000-acre industrial complex in Puerto Rico involving a variety of petrochemical processing and manufacturing enterprises...

...At the time of Udall's announcement, the case had been technically "out in the open" for just a little more than a year...

...Those terms: Phillips would receive a special 50,000 barrel-a-day import quota for foreign petroleum feedstocks which would be refined in the Puerto Rican plant and in turn shipped, in the form of 24,800 barrels a day of gasoline, to the company's eastern United States marketing outlets...

...The Interior Department release, mailed to editors and distributed at the Udall-Sanchez press conference, was a model of coy handoutsmanship...

...Since import quotas in Puerto Rico were set by Presidential proclamation, they would have to be revised by Presidential action...

...If Phillips were to bring 24,800 barrels a day of refined gasoline into the United States without raising the overall import total (a condition Udall promised to domestic producers), the increased allocation to Phillips would have to be accompanied by a drop in the quotas of other companies...

...What guarantees are there that Phillips will carry out the entire scheme for the second and third stage industrial development in Puerto Rico...

...At no point in the hand-out was there any allusion to the specific terms on which Phillips' good works in behalf of the Puerto Rican economy were to be conditioned...

...The Department of the Interior is faced with still another quandary...

...The case was tartly summed up in Oilgram, an oil industry trade journal: "It seems to many in the industry that Interior's decision would have been considerably more palatable if the Administration had resisted the temptation to give one company the inside track...

...The remarkable Chapman brief also complained that denial of the Phillips bid would put the Puerto Rican companies "in a position to determine in large measure the course of industrial development in Puerto Rico...

...We considered the Phillips proposal highly promising .. ." tAURENCE STERN is a staff writer for The Washington Post...

...Oh, no," said the Interior Secretary, "it has to be, of necessity, a negotiated matter...

...Phillips did not deign to show up for the stormy import control hearings —an event that, within the oil industry, compares with the opening of the New York social season at the Metropolitan Opera...

...Over many years the oil industry has been successful in resolving internal differences through a private governmental machinery of impressive effectiveness...

...It has served to maintain imports at about 12.2 per cent of domestic production...

...Within the industry, meanwhile, dark rumors floated that Phillips was able to win Interior's approval because of the two politically potent Washington law firms associated with the Puerto Rican project...

...Most lyrical of all was the joint statement issued by Keeler and Phillips president Stanley Learned, handed out simultaneously in Washington and Phillips' home town of Bartlesville, Oklahoma...

...W. Keeler, the Phillips Petroleum Company's vice president and executive board chairman—to serve as a "public" member of a four-teen-man advisory panel on the war against poverty...

...What had happened was that Phillips scored a coup against its rivals in the oil industry by blasting the first major loophole in the import quota system since it was established by a proclamation of President Eisenhower in 1959...

...The name of the Phillips Petroleum Company was not broached until page two, and even then in a much more tentative setting than the facts seemed to warrant...

...The losers under such an agreement," asserted multimillionaire J. Paul Getty's Tidewater Oil Company, "will be those whose domestic production or import quota allocations are curtailed to make room for such gasoline [as Phillips would bring in from Puerto Rico...

...He recited the by-now familiar litany of new jobs and new economic opportunities that would be created in Puerto Rico as a result of the Phillips project...

...It was in January, 1964, that Phillips applied to Interior's Oil Import Appeals Board for its special import allocation...

...It was not until the last sentence that the release got to the heart of the matter: The Department of the Interior would allow a special oil import allocation to the builder of the new petrochemical complex...

...Were any other companies being screened for the Puerto Rican project...

...He is a full-blooded Cherokee, and has served as adviser on Indian affairs to Secretary of the Interior Stewart L. Udall...

...The White House announced Keel-er's appointment to the poverty panel on February 1. Ten days later Udall found still another battle station for Phillips and Keeler in the war on poverty...

...Udall's action, they said, "will start work on plants in Puerto Rico expected to eventually result in an investment of about $600 million . . . [as well as] employment in the plants of this complex of over 33,000 people, besides indirect employment resulting therefrom . . ." To Phillips it was then a fait accompli...

...They should not be forced to suffer in order for Phillips to profit...

...Learned did not, however, answer all the points raised by the dissenting competitors...

...And the oil-import program has assumed its role in building the Great Society...

...Ultimately President Johnson, who sought soon after entering the White House to divest himself of oil matters, will have to ratify the special allocation to Phillips if it is to have the force of law...

...The inescapable conclusion: What is good for Phillips is good for the free world...

...Further, a vigorous Puerto Rican economy will pose a striking contrast to Cuba for the people of Latin America and the world to behold...

...For once, there are some disconsolate oil companies grumbling that they weren't picked to be the social workers...

...Udall announced that he had approved plans for a "huge petrochemical complex" in Puerto Rico as a major shot in the arm to the Commonwealth's economy...

...By the time the entire project is completed, in about ten years, several Secretaries of Interior may have come and gone...

...The true dimensions of the Phillips decision began to emerge during the questioning of Interior Secretary Udall at the February 11 press conference...

...It would be a case of robbing Peter to pay Paul...

...Such conjecture, whether well-founded or not, is the price that Washington's legal "insiders" must pay whenever they become associated with such controversial governmental decision-making issues as the Phillips project...

...There were hearings in July, 1964, when Phillips put on a highly polished presentation —including motion pictures—on how it proposed to build the Puerto Rican economy...

...Yet at no point before or after February 11 did Udall (or anyone else) submit a formal report setting out the reasons for the decision to give the big Puerto Rican allocation to Phillips...

...These rumors are utter nonsence...

...Phillips had agreed to build it...

...We had to choose one company to begin with," Udall answered, "and I suppose whichever company we chose, the other companies would be a little bit unhappy, but I am willing to take criticism...

...Thus, President Johnson, the Texan who wanted nothing to do with oil decision-making, may have to step into the biggest oil controversy that has erupted so far in his Administration...

...The official playlet in Udall's office went off without a fluff before the gallery of newsmen...

...The attorney for Phillips was former Secretary of the Interior Oscar L. Chapman, while the Commonwealth was represented by Abe Fortas, one of President Johnson's closest personal and political confidantes and also a New Deal alumnus of the Interior Department...

...Then Udall acknowledged that the matter had been "out in the open for one and a half years . . . Phillips Company is the only company that has come in and presented a proposal, and this is going to require very heavy investments...

...You'd almost have thought we would have to send all the Puerto Ricans back from New York to take the jobs Phillips was going to create," joshed one Interior aide...

...Learned airily dismissed the industry's objections on those points which he said "our competitors incorrectly analyzed or purposely distorted...

...If the policies of this government are directed toward the welfare of, or a war on poverty among, the people of Puerto Rico, such policies should be directed toward the people of Puerto Rico rather than to individual companies operating refineries in this Commonwealth," grumbled the Texas City Refining Company...

...Phillips has made it clear that the assault on poverty in Puerto Rico would have to be financed by the profits from the gasoline pumps of the eastern United States...

...Echoed Sanchez: "This decision will enable Puerto Rico to continue in progressive scale and to provide an important market for the United States...

...It is the ancillary production from which the Commonwealth hopes to get job benefits, not the "core" refinery that Phillips would build first to convert Venezuela's crude oil to gasoline for the pumping stations in New York, Philadelphia, and elsewhere...

...One petrochemical complex is already under development in Puerto Rico by the Commonwealth Oil Company, which was qualified as an importer under the original Eisenhower proclamation in 1959...

...The first page was devoted to Udall's finding that a huge petrochemical complex would be in the best economic interests of Puerto Rico...

...There have been rumors that political pressure was brought on Puerto Rico to accept Phillips and rumors that Puerto Rico and/or Phillips brought pressure on Interior from the White House," wearily recited one lawyer close to the case...

...Such giants as Texaco, Humble, Standard Oil of Indiana, Standard of Ohio, and others denounced the Interior decision favoring Phillips on grounds that it was discriminatory, would penalize the domestic industry, and threatened to disrupt the import program...

...To some insiders at Interior the Phillips case seemed to be developing complications that only a Solomon could unravel...

...Its relationship with the Interior Department has also been singularly harmonious—lubricated by a host of advisory committees in which oilmen and government regulators sit together in brotherly comity...

...After Phillips first filed for its application in early 1964, the company—in a brief by Chapman—said failure to grant it the special allocation would give a "built-in monopoly" to the existing Puerto Rican refineries...

...He won a George Polk Memorial Award in 1962 for distinguished reporting...

...However, Phillips did submit a statement in the form of a personal letter from its president, Stanley Learned, to Secretary Udall...