Senator DIRKSEN. Very well.

Senator O'MAHONEY, Any other questions?

(No response.)

Senator O'MAHONEY. The committee will stand in recess until 2 o'clock this afternoon.

(Whereupon, at 12: 10 p. m., a recess was taken until 2 p. m. of the same day.)

AFTERNOON SESSION

(Present: Senators O'Mahoney (presiding); Barrett, Carroll, Dirksen, Dworshak, Wiley; and Mr. McHugh, cocounsel.)

STATEMENT OF ARTHUR S. FLEMMING, DIRECTOR, OFFICE OF DEFENSE MOBILIZATION, ACCOMPANIED BY FELIX E. WORMSER, ASSISTANT SECRETARY OF THE INTERIOR; AND HUGH A. STEWART, DIRECTOR OF THE OFFICE OF OIL AND GAS, DEPARTMENT OF THE INTERIOR-Resumed

Senator O'MAHONEY. Let me say, gentlemen of the committee and those of you who represent the executive departments, that we are assembled here to discover whether or not the voluntary plan-by which the United States is attempting to substitute oil to our allies in Western Europe-is operating without injury to domestic producers and domestic refiners, and whether or not the special committee of 16 originally appointed which consists of the largest oil companies in the industry can actually be expected to carry out a program of this kind in the public interest and in the interest of the defense of the United States.

The committee will now come to order. I think that we should proceed, Dr. Flemming. Are you ready to respond to certain questions that were asked this morning?

Mr. McHugh, are you ready to restate those questions?

Mr. MCHUGH. I think, Dr. Flemming, we inquired at the conclusion of the morning session as to whether or not you think the plan of action, set up under the August 10 plan of action creating MEEC, has been successful in accomplishing the Government's objective in getting oil to Western Europe?

Mr. FLEMMING. Mr. Chairman, I will be very happy to respond to that question. In responding to the question, I would like to say this: That it is a little bit early to make a complete and fair evaluation of the results of the actions taken under this plan of action. Some evidence is available to us, however, and I think it is very fair for all of us to take a look at that evidence and see just what it points to in the way of conclusions.

First of all, I would like in responding to the question to give a brief summary of what the Committee has done. In September and early October of 1956 the Middle East Emergency Committee and the various subcommittees prepared and analyzed information on all phases of foreign petroleum operations to determine what measures might be taken to redistribute petroleum supplies in the event that either the Suez Canal or the Middle East pipelines were closed.

Apparently as a result of these analyses, the individual companies were able to move rapidly after the closure of the Suez Canal and the

stoppage of the Iraq pipelines to reform their own patterns of supply and redeploy their own tankers in an effort to achieve maximum utilization of tanker capacity available to them.

During the month of November, as we all appreciate, the individual companies, on the basis of the information collected by the Committee, were able to do a great deal toward moving supplies to Europe in substitution for the supplies that had been cut off. Then, within a few days after its reactivation, on December 3-and I think it is important for us to keep in mind the fact that the Committee was not put into action on an operating basis until December 3, which is just about 2 months ago the Committee as a result of its previous analysis and study-all of this preliminary work began to pay dividends-was able to forward to the Administrator, that is, the Secretary of the Interior, the schedules or programs for cooperative action to make available additional supplies to Europe.

When these schedules were issued by the Administrator on the 7th of December, the members of the Committee immediately began making cooperative arrangements to implement them. The result of these arrangements is demonstrated by the statistics as to movements during the month of December.

On the first statement as to estimated December movements, which was based upon information submitted prior to the reactivation of the Committee and, therefore, assumed that there would be no Committee schedules, movements to Europe from all sources, normal and abnormal, were estimated at 1,997,000 barrels per day. The final statement prepared by the Committee as to December movements showed a total movement of 2,427,000 barrels per day.

These statements also show that loadings for import from the Middle East to the east coast of the United States and Canada in December were first estimated in early December at 211,000 barrels per day. That was the estimate of what would come from the Middle East to the east coast of the United States and Canada. That was an estimate as to what would happen.

The final estimate of these loadings for December was 73,000 barrels per day, and they have shown some further reduction since that time. This reduction is a result of the diversion of these supplies to Europe and the substitution of supplies from the Western Hemisphere.

Now, the speed of such action in realining world supplies and involving in many cases diversions of ships at sea would not have been possible without the mechanism of the Committee. The magnitude of these accomplishments, particularly the cooperative actions that were necessary to effect the diversion to Europe of supplies normally moved to the Western Hemisphere, could only have been accomplished through these provisions of the Defense Production Act under which we are working.

Senator WILEY. May I interject, Mr. Chairman, and ask one question to get this in balance? What did we ship per day to Europe before Suez?

Mr. FLEMMING. About 50,000 barrels.

Senator WILEY. Per day?

Mr. FLEMMING. Yes; per day.

Senator DIRKSEN. What was that figure again?

SHIPMENTS TO EUROPE

Mr. FLEMMING. About 50,000 barrels per day shipments of-this was not crude, of course; these were products. We shipped about 50.000 barrels per day of products to Europe prior to the Suez crisis.

The Committee organization also, it seems to me, had served to facilitate the carrying out of these actions by affording quick access to the detailed kind of information that is needed and by making available the combined judgment of petroleum experts from all the companies. For example, I was told about 1 company that had a complicated tanker movement of about 25,000 barrels per day halfway around the world, which is considered to be the best way to use its tonnage. This movement was referred to the Supply and Distribution and Tanker Subcommittee of the Middle East Emergency Committee for detailed analysis. Their studies showed that, while the movement in question was an efficient utilization of tankers by the individual company, it could be markedly improved upon from an overall industry standpoint by developing an exchange, and this illustrates how greater flexibility of the industry as a whole can be substituted for an individual company's limited flexibility in the case of an emergency.

Now, of course, it is difficult to appraise mathematically the extent of the Middle East Emergency Committee's assistance. The Department of the Interior informs me that, in their judgment, without the Middle East Emergency Committee, the oil assistance to Europe would have been 30 to 50 percent less, and much of it seriously delayed during this critical period.

Now the Department of the Interior is in a position to give you the reasoning that lies back of that particular conclusion. They have given me the conclusion and I am just simply presenting it at this point, but they will be able to give the details on it.

Senator WILEY. When you said 50,000 barrels per day, you meant that was the average per day over months previous to Suez?

Mr. FLEMMING. The answer is "Yes." Over a period of months and prior to Suez.

Senator WILEY. All right. Now then that has gone up under the Committee to 2,027,000 barrels per day?

Mr. FLEMMING. No, Senator Wiley. Let me go back now and give you these figures that you are now referring to. I said that on the first statement as to estimated December movements, which was based upon information submitted prior to the reactivation of the Committee, and therefore assume that the Committee wouldn't be in operation, movements to Europe from all sources, normal and abnormal, were estimated as 1,997,000 barrels per day, just under 2 million. That is from all sources, Western Hemisphere, Middle East, and every place else.

The final statement prepared by the Committee as to December movements showed a total movement of 2,427,000 barrels per day, again from all sources. Most of that undoubtedly came from the gulf-coast area or the Caribbean, one or the other. In other words, you have got an increase there of about 430,000 barrels per day following the reactivation of the Committee.

Let me give you the figure that I think you are interested in, and this figure is subject to further check, but it is the best figure that has been made available to me up to now.

From the first of November until January 23, it is estimated that 475,000 barrels per day have been moving to Western Europe. Now that is of both crude and products, and approximately 258,000 of that, as I understand it, has been crude.

Mr. McHUGH. What period of time does that cover, Doctor?

Mr. FLEMMING. That is from the 1st of November until January 23, an average for that particular period.

Mr. MCHUGH. During that period of time, what were the Government's objectives concerning the per-day barrel shipment of crude? Mr. FLEMMING. We had estimated in our prior plan that it should be possible to move approximately 300,000 barrels per day from the gulf coast to our own east coast, and to the Canadian east coast, to replace the shipments from the Middle East. We had also estimated that it should be possible to move about 500,000 barrels per day from the gulf coast, Caribbean area, to Western Europe. Those were our rough estimates based on the best information that was available at that time.

Mr. McHUGH. Do I understand you to say now that the Government's goal was 500,000 barrels per day to Western Europe from this period of time, December 3, approximately, to the end of January? Mr. FLEMMING. I wouldn't like to state that as a goal. It was our estimate as to what could be done during the-if the resources were pooled, and so on; I mean, particularly the tanker resources.

As you know, even with that shipment to Western Europe, the estimate was that Western Europe would be meeting only about 75 percent of its requirements. So certainly if it were possible to move more than 500,000 barrels per day, we would want to do it. But the best estimates we had at that time were that it would be possible to move about 500,000 barrels per day.

Mr. McHUGH. And do I understand, then, that between December 3 and the end of January, our total shipments of crude to Western Europe were only a little over half that amount?

Mr. FLEMMING. No. Our actual shipments from the first of November until January 23 averaged 475,000 barrels per day of both crude and products.

Mr. McHUGH. I am speaking of

Mr. FLEMMING. The crude shipments were 258,000 barrels per day. Now we never assumed when we took that 500,000 figure that all of it would be crude. But I think it is fair to say that we assumed that a larger percentage of it would be crude than has proved to be the case. And the fact that we haven't been able to ship a larger percentage of crude is one of the reasons, as you know, that has created the fuel oil problem in Western Europe, and that is really the serious problem confronting Western Europe at the present time.

So, I wouldn't want to say that we were just 25,000 barrels short of what we thought we could do. Overall that is a correct statement, but actually we estimated a much larger proportion of products-I mean, a much larger proportion of crude to products.

Senator DIRKSEN. Mr. Chairman, may I ask at this point-I just want to get these figures in mind.

There was a movement of 211,000 barrels a day from the Middle East to our east coast?

Mr. FLEMMING. That is right.

Senator DIRKSEN. And the purpose of the 300,000 barrels to be moved from gulf ports and elsewhere to our east coast was to make possible the diversion of those 211,000 barrels to European users? Mr. FLEMMING. That is right.

Senator Dirksen, I think probably I should back up there. Before this committee started to operate at all and before the Suez crisis, the movement of Middle East oil to our east coast was about 300,000 barrels per day and to the Canadian east coast it was about 50,000 barrels per day.

Senator DIRKSEN. So that is 350,000?

Mr. FLEMMING. That is 350,000. Now early in November, before this committee was reactivated but after the Suez Canal had been closed and the Iraq pipeline was out of commission, it was estimated that there would be a movement of about 211,000 barrels per day to our east coast. In other words, already there was a cutback in the movement from the Middle East to our east coast without the committee being reactivated.

After the Committee was reactivated, then the estimate was that the movement from the Middle East to our east coast would go down to 73,000 barrels per day.

Senator DIRKSEN. Now then how successful have you been in moving petroleum to the east coast to take care of that deficiency?

Mr. FLEMMING. Well, the east coast does not face-I mean, the refineries on the east coast do not face any deficiencies. The fact of the matter is one of the provisions of the plan of action is that these movements must be worked out and rearranged in such a way as to insure the fact that we will not have less than our requirements in this country.

Now if I take the next logical step, it brings us into another phase of the problem and I think I might, Mr. Chairman and Senator Dirksen, if it is agreeable, just complete my evaluation of this tentative evaluation, and then you undoubtedly will want to come back and ask me questions about it because I certainly don't want to create-let me put it this way:

I feel that what has happened up to the present time has demonstrated very clearly that we could not have made the contribution that has been made in dealing with the problems in Western Europe without having this plan of action in operation. And I also want to again stress the fact that this plan of action is in operation because these companies have voluntarily agreed to function under it. So I think we have made progress. But I do think in evaluating, again, that it is very important for us to keep in mind the fact that this is a voluntary program. We are not talking about Government directives of any kind at this point. This is a voluntary program.

All the Government has done here is to make it possible for companies to participate in a voluntary program with their action subject to approval or disapproval by the Government. But the Government has not initiated what might be called a program that would be characterized by directives of any kind. This is a voluntary action all the way along the line.

Senator WILEY. Has there been any evidence of foot-dragging? Mr. FLEMMING. Well, I am coming to that. I won't avoid that. Now this voluntary program, I think it is clear from the information that I have already given to the committee, has produced certain