Trade Agreements Act Extension

Our good neighbor to the North, Canada, with its high cost to produce crude oil like ours, has a great potential for additional oil

reserves.

It is entitled to a share in the American market and is certainly a substantial partner in the defense needs of our country.

Alaska, soon to be one of our sister States, has tremendous possibilities for oil and gas which are just starting to develop.

Just last week at the Interstate Oil Compact Commission meeting at Salt Lake City, Secretary of Interior Seaton stated that since the discovery in the Kenai Peninsula, 39 million acres have been leased, or one-half as much as all of the leased area on the continental United States with shelf included.

Moose Preserve is to be opened this year, and by next year another 30 million acres will be under lease. Likewise Port Barrow will be open for exploration of gas and possible oil, all this pointing to the fabulous reserves available to us.

He further related that the present proven oil reserves of 35 billion barrels in the United States can be further supplemented by production of oil shales and coal to the extent of 300 billion barrels of reserves.

This has already been proven by the Bureau of Mines research in their refinery development at Rifle, Colo. This can be counted on to be developed only if there are adequate incentives.

Such producing States as Texas, Oklahoma, Kansas, Louisiana, and other midcontinent areas will continue to find substantial quantities of oil in undrilled structures and stratigraphic conditions which research is presently bringing into the realm of reality.

In the last few weeks, a record depth test beyond 20,000 feet has found a 300-foot productive section with pressures too high to test. This latter test illustrates the immense reserves left in areas which have been drilled, the discovery well being in an area where only 1 test has been drilled to every 1.8 square miles in contract to the 1 in 28 as referred to before in the Rocky Mountain area.

Surely we are not running out of reserves, but we are running out of incentive. This Nation will not be in short supply of oil for its defense needs if the producers are allowed the just and proper incentive necessary to offset the risks involved.

It would truly be presumptuous on my part to tell this committee what should be contained in the new Trade Act for the overall good of this country, but on behalf of the tristate area I do feel the duty and obligation to present the foregoing facts.

It is your responsibility to insure the security of this Nation.

Any extension of the Trade Act, be it for 2, 3, or 5 years, must, in my opinion, include an amendment with language clear and specific which will limit imports of crude oil and related products to a level sufficient to regain and maintain a healthy domestic producing oil industry.

Thank you.

Senator DOUGLAS (presiding). Thank you very much, Mr. Brehm. Senator Bennett, do you have any questions?

Senator BENNETT. I have no questions.

Senator DOUGLAS. Thank you very much, Mr. Brehm.
Mr. BREHM. Thank you.

Senator DOUGLAS. The next witness is Mr. Eugene M. Locke, representing the Texas Independent Producers & Royalty Owners Association.

Mr. Locke, I notice you have quite a lengthy statement. Would it be satisfactory to you if this were printed in the record and if you made a somewhat shorter statement?

STATEMENT OF EUGENE M. LOCKE, TEXAS INDEPENDENT PRODUCERS & ROYALTY OWNERS ASSOCIATION

Mr. LOCKE. Yes, Mr. Chairman, it certainly would, and as a matter of fact, I had intended only to summarize the statement and not to read it.

I will read the first part only, giving my background.

I am Eugene M. Locke, of Dallas, president of the Texas Independent Producers & Royalty Owners Association.

I am an attorney by profession, the greater part of my practice being in the field of oil and gas law. I am also the owner of oil and gas royalty and operating interests.

I am privileged to appear here today to speak on behalf of the more than 6,000 nonintegrated independent oil and gas producers and owners of oil and gas royalty interests in the State of Texas who make up the membership of our association.

These are the small companies, partnerships, and individual operators of the kind that have accounted historically for about 80 percent of the oil discovered in this country and who, in 1957, were responsible for about 76 percent of all the wells drilled and more than onethird of all the oil produced in the United States.

Reluctantly, we have concluded that the Trade Agreements Extension Act as passed by the House of Representatives is inadequate to deal with the acknowledged problem of excessive imports.

While we want very much to comply with the request that our testimony be confined to consideration of the bill as it now appears— and it certainly is my primary purpose here to discuss what seems to us to be deficiencies in it-we do feel it necessary to include a discussion of some background of the problem and the administration program for dealing with it.

In short, our position is that the voluntary program has not worked, is not working, and is not likely to work unless more positive language is written into the security clause.

Now I have divided my summary into these parts:

First, the need for controls and why it exists.

Second, what controls are needed.

Third, have the present controls worked?

Fourth, why haven't they worked?

Fifth, what is the new language in the law put in recently by the House of Representatives, and will it work; and, finally, what language is needed?

First, the need for controls and why they are needed.

Every responsible summary or investigation that has been made has come to the conclusion that controls are needed.

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First, the National Petroleum Council in 1949, which is a group made up of all segments of the oil industry, including importers. Second, the executive committee of the API, 1953. That also is a group made up of all segments of the oil industry, including importers.

Third, the President's Cabinet Committee, both in 1955 and in 1957. Fourth, the ODM findings, Office of Defense Mobilization.

Fifth, the findings of Congress, as indicated by the security clause of the present act.

Sixth, statements even of some of the major companies such as the Standard of New Jersey, to the effect that it is necessary to maintain a healthy domestic industry.

And finally, a statement of the Defense Department itself to the effect that we cannot rely on foreign oil, a statement which is contained in the statement made earlier by Mr. Robert L. Wood and made on behalf of the Defense Department.

Now the only thing that has been said by anyone that I know of in dissent to what I have just said is the statement that we are running out of oil.

We have on page 34 of our booklet various different statements made by the Government at different times in the past, beginning way back in the year of 1890 that we were beginning to run out of oil. Indeed one of those statements stated that they were not going to find any oil in Texas.

The statements have, of course, been proved false.

It is not the oil that is used, it is the relationship between the oil that is used and the oil that is found that is important, and every year practically in the past we found more oil than we used and the reason we found it was because we went out and drilled for it.

This last year, for the first time we used more oil than we found, and the reason was that there were less wells drilled, and if we take the average oil discovered in reserves per well drilled and if we drilled in 1957 the same number of wells we drilled in 1956 then our reserves would have increased, not decreased as has been the case. Now, we need controls, it is admitted.

What controls are needed?

I think we could go first back to the Cabinet Committee statements made in 1957; what did they say we needed?

Well, they said if you did not control imports, first oil would be coming in in ever-mounting quantities disproportionate to the needs to supplement the domestic supply-supplement, not supplant. So the program should, presumably, keep oil from coming in in these ever-mounting quantities which would supplant the supply. Secondly, discouragement of and decrease in domestic production. So presumably any program would be aimed at preventing the decrease in domestic production.

Thirdly, the marked decline in domestic exploration and development, so again presumably any program would be designed to prevent that from occurring.

Fourthly, it should encourage free enterprise exploration at a rate consistent with the demands of a growing economy.

So presumably the Cabinet Committee found as demand increased exploration should increase and that the program that was adopted should be designed to accomplish that result.

To effectuate the above, according to the Cabinet Committee, we must keep a reasonable balance between domestic and foreign supplies.

Now, what ratio would accomplish these results?

The ratio that the Cabinet Committee found back in 1955 was the ratio between imports and domestic production that existed in the year 1954 which was 16.6 percent.

This was specifically found by the Committee, and there were many statements, both by this committee and by various Senators on the door of the Senate, which indicated that it was the intention of this committee and of the Senate to preserve that ratio.

Gov. Price Daniel, who has submitted his statement today without personally appearing, has documented those talks on the floor of the Senate and statements by the various members of this committee, nd I refer you to Governor Daniel's statement for that purpose. Now have the controls worked?

The administration says they have worked.

The administration says they are 95 percent successful. And why? Well, I will read you one paragraph from a statement, a speech nade by the Honorable Fred A. Seaton, Secretary of the Interior, s delivered by the Honorable Hatfield Chilton, Under Secretary of he Interior, at the meeting of the Interstate Oil Compact Commission t Salt Lake City on June 24 of this year.

He said:

The Federal Government has issued 58 separate import allocations and to best knowledge there have been only 3 who could possibly be called nonmpliers, therefore the program has gained 95 percent compliance over the ast 9 months.

Moreover, because one company, which had previously not been in compliace is now and probably will remain so in the future, the program today has 1 percent compliance.

Moreover, if still another company reverses its present policies and practices ad one is reported considering doing so, the program will have achieved alost 99 percent compliance.

Now we might argue with the question of how many

Senator DOUGLAS. Which are the companies that have not comlied?

Mr. LOCKE. Eastern States is definitely not complying. They have finitely filed a lawsuit. Tidewater was not complying for a long me. It now states that it is complying.

I can't call offhand the three companies that he refers to here in e beginning, but I feel certain one of them is Eastern States. Senator DOUGLAS. Is not Tidewater the center of the so-called etty Empire?

Mr. LOCKE. That is correct. It certainly is, sir.

Senator Douglas, the thing I want to invite your special attention here is this: In the first place the effectiveness of the program as being 99 percent effective does not depend on the amount of comnies that comply.

The one company that is not complying might be Gulf Oil which concededly the chief importer.

We could get a hundred percent compliance by quadrupling the otas you set. So to me saying the program is 95 percent effective canse 95 percent of the companies comply is somewhat ridiculous, ankly.