wide special preference was not needed in the first two quarters of 1952, a period of relatively good materials availability, it has been urged by DEPA recently because of the widespread failures in materials deliveries anticipated and already experienced due to the steel strike. As discussed more fully in the section on materials and equipment, special expediting assistance has been accorded selected projects related to AEC as a result of the steel strike difficulties, but for the reasons there described those measures do not meet the needs of the whole power program. Other recommendations of the joint committee, action upon which rests primarily with other agencies, are the following: 6. The joint committee recommended that the Atomic Energy Commission give attention to the possibility of adding controlled atomic fission to the sources of energy available for industrial uses. This is a matter outside the jurisdiction of DEPA. It is understood that the Atomic Energy Commission has been working with utilities in this field. 7. The joint committee recommended that consideration be given by appropriate authorities to complementing hydroelectric plants with thermal plants. In its approval of projects and the distribution of materials for the construction of projects, DEPA has acted in a manner consistent with this recommendation. Private utilities having hydroelectric generation also in most cases have steam plants operating in a complementary manner. In the area of Federal hydroelectric development, this is true, however, only of the Tennessee Valley Authority. Proposals for steam plants supplementing other Federal hydroelectric plants have been the subject of consideration by the Congress and are still under study. Not until such plants are authorized would they become applicants for DEPA action. 8. The joint committee called attention to the desirability of further development of hydroelectric power and to the need for advance planning in view of the long lead time involved in the construction of such projects. Because of the long lead time factor, DEPA's power supply planning for the Pacific Northwest, an area primarily dependent upon hydroelectric power, is projected 5 years ahead compared with 3 years ahead for the rest of the country. All hydroelectric projects submitted to DEPA for authorization to begin construction and materials allotments have been acted upon favorably. Extraordinary steps have been taken to expedite material and equipment deliveries for hydroelectric projects in the Pacific Northwest as well as to overcome other obstacles such as financing difficulties facing such projects in that area. Some of these projects have thus far been frustrated, however, by litigation in the State courts. The full development of Federal hydroelectric projects depends, of course, upon congressional authorization. PETROLEUM ADMINISTRATION FOR DEFENSE General programs conducted by the Petroleum Administration for Defense include the following: 1. Forecasting of free-world demands for crude oil and its products under conditions of (a) mobilization and (b) possible all-out war. 2. Determination of the supplies of crude oil available by areas in the United States and in other countries this side of the iron curtain. 3. Determination of the usable capacity for refining crude oil by areas within the United States and by countries throughout the free world. 4. Determination of the usable capacity of all facilities commonly used in transporting petroleum or its products-pipelines, tank cars, tank trucks, barges, and tankers. 5. Determination of what expansion, if any, is needed in production, refining, and transportation to meet the forecast demands. 6. Forecasting of demands for natural, manufactured, and mixed gas under conditions of (a) mobilization and (b) possible all-out war. 7. Determination of available supplies of natural gas by areas in the producing fields. 8. Determination of the potential capacity for production of manufactured gas. 9. Determination of the transmission capacity of natural-gas gathering systems, trunk pipelines, and distribution systems. 10. Determination of what expansion, if any, is needed in production or transportation to meet the forecast demands for gas. 11. Determination of the capacity of those supporting industries that contribute all or most of their output to the oil and gas industries-manufacture of oil-field equipment, of certain refining catalysts, and of tetraethyl lead, for example and of any expansion of those industries necessary to meet forecast demands. 12. Determination of the amount of materials needed in the oil and gas industries and closely related industries to maintain current capacity and to provide needed expansion. 13. Presentation before DPA and NPA of the claims for these materials and the justification for the claims. 14. Distribution of the materials allotted by DPA to PAD among the various operating units of the industries, giving due priority to projects most urgently needed in the defense mobilization program. 15. Determination of the extent to which incentives for expansion of capacity-necessity certificates for accelerated tax amortization, for example, or defense loans are required in each part of the industries involved. AUTHORITY PAD gets its powers from the following authorities: The Defense Production Act of 1950, as amended (50 U. S. C. App. Supp. V, sec. 2061 et seq.; Public Law 429, 82d Cong., 2d sess.) ; Executive Order 10161, September 9, 1950, as amended (15 F. R. 6105; 16 F. R. 61, 8789; 17 F. R. 1171); Executive Order 10200, January 3, 1951 (16 F. R. 61); DPA Delegation 1, January 24, 1951, as amended November 3, 1951 (16 F. R. 11245); DPA Order 1, May 24, 1951, as amended (16 F. R. 4913, 11038; 17 F. R. 899) ; DPA Regulation 1, as amended February 14, 1952 (17 F. R. 1467); DTA Delegation 6, May 5, 1951 (16 F. R. 4149); NPA Orders M-46, M-46A, and M-46B; NPA Delegation 9, February. 26, 1951 (16 F. R. 1908); NPA Delegation 13, May 25, 1951 (16 F. R. 5024; as amended June 1, 1951, 16 F. R. 5295); Supplement 1 to NPA Delegation 13, June 30, 1951 (16 F. R. 6406); NPA Delegation 14, as amended March 6, 1952 (17 F. R. 1971); Interior Department Order 2591, October 3, 1950 (15 F. R. 6767; as amended December 21, 1950, 15 F. R. 9529; as amended January 29, 1951, 16 F. R. 932; as amended March 27, 1951, 16 F. R. 2896); Revenue Act of 1950, September 23, 1950 (64 Stat. 939). Interior Department Order 2193 established the Oil and Gas Division within the Department. Interior Department Order 2602, issued December 1, 1950, transferred to PAD most of the Oil and Gas Division functions except the administration of the Connally "Hot Oil" Act. COOPERATIVE ACTIVITIES PAD since its inception has established close working relationships with a large number of other Government agencies. On January 17, 1951, for example, the agency concluded an agreement with NPA by which NPA agreed to delegate to PAD its authority over production and distribution of tetraethyl lead fluid, petroleum cracking catalysts, special inhibitors used in gasoline, lubricating-oil additives, fluids and additives made especially for well drilling. PAD for its part delegated to NPA authority over production and distribution of carbon black, ammonia, butyl rubber, and other synthetic rubbers and also delegated to NPA authority over distribution of naphthenates and a number of other widely used products. Effective May 14, 1951, PAD delegated authority over the distribution of petroleum coke to the Administrator of the Defense Solid Fuels Administration, Department of the Interior. On May 7, 1951, for another example, the Defense Transport Administration delegated to PAD authority for control over facilities for bulk storage of petroleum and gas, since tank storage is so closely related to refining and marketing. Details of these delegations are available in Senate Report No. 1040 (82d Cong., 1st sess.), First Annual Report of the Activities of the Joint Committee on Defense Production, pages 288-290. Close working relationships have been established between the Federal Power Commission and PAD on matters relating to gas and between the Interstate Oil Compact Commission and PAD on matters relating to oil. Particularly close relationships have been established between PAD and the Texas Railroad Com mission and the Louisiana Department of Conservation as well as other State petroleum regulatory bodies. Distribution of controlled materials to oil and gas operators in foreign countries, except for Canada, is handled cooperatively by PAD, the Mutual Security Agency, and the Office of International Trade. Distribution of materials to operators in Canada is effected through joint arrangements between PAD, the Canadian Division of NPA, and Canada's Department of Defense Production, Toronto, Canada. PAD regularly calls on the Bureau of Mines and the Geological Survey for special statistical surveys and technical field studies. Two interagency committees are chairmanned by PAD representatives: 1. The Foreign Petroleum Committee, which includes representatives of the Department of Defense (Munitions Board, Office of Petroleum Programs), the Department of Commerce (OIT and Maritime Administration), the Department of State, the Mutual Security Agency, the Defense Production Administration, and the National Production Authority. 2. The Foreign Petroleum Materials Committee, which includes representatives of NPA, the Department of State, the Department of Defense, OIT, CPA, and MSA. PAD's Assistant Deputy Administrator in charge of Foreign Petroleum Operations is the United States representative on the Petroleum Planning Committee of the North Atlantic Treaty Organization and is a special consultant to the United States Ambassador at large to NATO. PROGRESS OF THE PROGRAM Calendar 1951 saw a new all-time record for well-drilling established in the United States-44,516 wells were drilled. Of these, 23,453 were producing oil wells, 3,030 were producing gas wells, 1,380 were service wells, and 16,653 were dry holes. PAD had hoped, basing its expectations on industry plans, that a total of 50,000 wells would be drilled during calendar 1952. Such drilling would have increased the Nation's capacity for producing crude oil from 7,200,000 barrels a day as of January 1, 1952, to 7,722,000 barrels a day by year's end. Loss of steel production during the steel work stoppages made impossible the production of pipe for this large a program, however. It is now estimated that 45,500 wells will be drilled during the year-still a record high-and that productive capacity will be 7,609,000 barrels a day at year's end. From June 13, 1951, effective date of the beginning of the Controlled Materials Plan for the oil and gas industries, through August 29, 1952, PAD had received 5,425 applications for permission to complete or construct a petroleum or gas project. Four hundred and one applications, for projects valued at $452,496,892, were either denied by PAD or withdrawn by the applicants. A total of 4,878 applications were approved for projects valued at $4,724,772,922. Approvals by industry categories were the following: Gas Supply and transportation.. Marketing Production_ $1,903, 120, 365 A total of 146 applications were being processed by PAD at the end of August. Also as of August 29, 1952, PAD had received applications for accelerated tax amortization on oil and gas projects valued at $3,833,791,000. It recommended to DPA approval of accelerated amortization on an average of 53 percent of the $2,830,497,000 cost of the projects it found worthy of necessity certificates, disallowed amortization on $49,312,000 of the cost, and recommended denial of amortization on $335,172,000 of the cost. Applications for accelerated amortization on projects valued at $606,827 were still being processed by PAD at the end of August. An August survey by PAD disclosed that since the beginning of the Controlled Materials Plan on July 1, 1951, the industry had started construction of new basic refining facilities in the United States with an aggregate capacity for 819.000 barrels a day of crude oil, planned total expansion of these facilities by 1,215,000 barrels a day. Facilities with a capacity of 528,600 barrels a day were scheduled-discounting delays caused by the steel strikes-for completion by January 1, 1953, with the total rising to 742,460 barrels a day by July 1, 1953. Production of tetraethyl lead fluid, used to increase antiknock qualities of motor gasolines, improved sufficiently during the year to permit PAD to suspend its limitations on the use of the fluid in gasoline. Section 3 of PAD Order No. 1, the section that spelled out the limitations, was suspended April 1, 1952. Sufficient gas-transmission lines were laid during the past 12 months to permit PAD on August 22, 1952, to modify and liberalize its PAD Order No. 2, originally effective August 22, 1951, and designed to slow down extensions of natural-gas uses in areas where shortages threatened. The amended order completely removed restrictions on extensions in areas of Michigan not served with gas supplied wholly or partly by the Michigan-Wisconsin Pipe Line Co. It also modified restrictions in the areas in which it remains effective-Connecticut, Delaware, the District of Columbia, Massachusetts, those parts of Michigan served by the Michigan-Wisconsin Pipe Line Co., New Jersey, New York, and Rhode Island. Disparities between Gulf and east coast ceiling prices on heating oil plus high tanker rates for the haul from the Gulf to the East made it impossible for some suppliers economically to get enough oil to meet their commitments for the winter of 1951-52. As a result a shortage of heating oil threatened on the east coast. With the approval of the Department of Justice, PAD succeeded in concluding a voluntary agreement, effective February 19, 1952, under which 12 companies agreed to join in supplying oil and kerosene over and above their own commitments to suppliers in need. These 12 companies served on an East Coast Supply Committee and at PAD direction supplied 1,700,000 barrels of heating oil and kerosene to avert shortages in the Boston, New Haven, and New York areas. (Scheduled to conclude automatically on April 30, 1952, the East Coast Supply Committee in effect was terminated April 5, 1952.) At the time the agreement was being effected, the Office of Price Stabilization, at PAD's request, promised to review the heating-oil ceiling prices with a view toward preventing possible shortages in the winter of 1952-53. In July, OPS approved an increase in east-coast ceilings of 0.8 cent a gallon. During the past 12 months PAD also worked to make up several specialized shortages: 1. To avert a threatening deficit of 2,100,000 barrels of Navy Special Fuel Oil below naval requirements, PAD on October 1, 1951, directed four companies to supply the oil during October, November, and December. It also directed 14 other companies to make up on a pro rata basis any deficits in grade C fuel oil the four primary suppliers might suffer as a result of the diversion of their stock to production of Navy special. 2. In an effort to increase the available supplies of aviation gasoline to meet expanding military and civilian demand, PAD on October 19, 1951, issued two orders. One, PAD Order No. 3, prohibits the use of alkylate and certain other blending agents in anything but aviation gasoline and requires the use of available raw materials for production of alkylate as directed by PAD. The second, PAD Order No. 4, puts a floor on the amount of tetraethyl lead to be used in the manufacture of aviation gasoline-4 cubic centimeters for each gallon to be used by domestic airlines, 4.6 cubic centimeters for each gallon to be exported. 3. In the late summer of 1952, PAD helped avoid a possible shortage of jet fuel for the military by persuading refiners voluntarily to increase their production of the fuel. These three situations provide examples of three of the principal means by which PAD has worked to avert shortages detrimental to the defense programby order, by directive, and by persuasion to cooperation. Chief reliance has been placed on the third of the methods. Free-world supplies of petroleum and its products came into sufficient balance with demands during the year so that the Secretary of the Interior was able on July 8, 1952, to revoke plan of action No. 1 under the voluntary agreement relating to the supply of petroleum to friendly nations, effective June 25, 1951. This plan of action, itself effective July 26, 1951, was designed specifically to permit, at Government direction, trades and other transactions among 19 American companies with operations abroad in order to relieve free-world shortages caused by the shutting in of Iranian production of crude oil and products as a result of the controversy over nationalization of Iran's. oil. Transactions involving 45,987,000 barrels of crude oil and refined products were covered in 25 schedules approved and issued by the plan's administrator, the Assistant Deputy PAD Administrator in charge of foreign petroleum operations. The voluntary agreement itself was continued in existence to provide a mechanism by which PAD could keep itself fully informed of statistics on foreign petroleum supply and demand. In mid-August a PAD survey determined that foreign refiners in countries this side of the iron curtain were planning construction to increase the capacity in these countries from approximately 5,000,000 barrels a day as of the end of 1951 to 5,800,000 barrels a day as of the end of 1953. Indications were that the following will be the approximate foreign capacities in specialized facilities by the end of 1953 by comparison with those capacities at the end of 1951: Catalytic cracking: 500,000 barrels a day as against 200,000. NEED FOR THE PROGRAMS In 1940 the Nation was using about 4,000,000 barrels a day of petroleum products, had a capacity to produce more than 5,000,000 barrels a day. The unused reserve capacity at the time was 34 percent above domestic consumption. With the outbreak of war this reserve was quickly used to take care of rapidly expanding demands. Today domestic consumption of petroleum products is about 7,200,000 barrels a day, and national capacity to produce is only some 8,000,000 barrels a day. Our reserve is only about 10 percent of consumption, and this provides only a small cushion for possible emergency. How severe the effects of even temporary dislocation of the petroleum industry can be was demonstrated during May 1952, when work stoppages closed down some 35 percent of the Nation's refining capacity. PAD had immediately, through PAD Order No. 5, to limit the inventories of all petroleum products in the hands of resellers and to require agency approval for exports of the products. Through PAD Order No. 6 it barred sports and pleasure flying and restri ted other flying to 65 percent of the March use of aviation gasoline. The restrictions were lifted as soon as the petroleum strikes had been settled, but the country had had abundant evidence of how thin was its margin of safety on petroleum supplies. Military demands continue to increase as the tempo of the defense program increases, and the armed services find themselves looking always for more and more products, especially aviation gasoline, jet fuel, Diesel fuel, and Navy special fuel oil. During fiscal 1952 the armed services purchased, in the United States and abroad, approximately 150,000,000 barrels of petroleum products. For fiscal 1953 they plan purchases of some 200,000,000 barrels. Free-world supplies in general, while in rough balance, must be expanded to meet growing demands. With the full approval of the National Security Resources Board and the Defense Production Administration, PAD now is engaged in a program of encour, aging the industry to build a reserve productive capacity in the United States for crude oil of at least 1,000,000 barrels a day, with other industry facilities in step with that goal. SMALL BUSINESS PAD generally has taken pains to see to it that small business in the oil and gas industries is protected. Two programs in particular have been geared to this particular interest: 1. In allocating oil-country tubular goods-casing, tubing, and drill pipe used in drilling and setting wells-that are available to it, the agency has made sure that smaller operators get their full share of the available pipe. Regularly it sets aside 5 percent of the available tubular goods in emergency field stocks, which are reserved almost completely for use by smaller operators in their wildcat (exploration) activities. Over the quarters of the Controlled Materials Plan smaller operators-those who normally drill fewer than 40 wells in a yearhave received approximately 35 percent of the available pipe; larger operators, 65 percent. This ratio corresponds to that customary in the history of the industry. For the fourth quarter of 1952, when only conversion pipe-pipe made from steel a mill gets from other than its regular source of supply-will be available in any quantity, smaller operators have been assigned 42 percent of the 31,000-ton total allocation; larger operators, 58 percent. |