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EMERGENCY OIL LIFT PROGRAM AND RELATED

OIL PROBLEMS

TUESDAY, FEBRUARY 19, 1957

UNITED STATES SENATE, SUBCOMMITTEE ON ANTITRUST AND MONOPOLY,

OF THE COMMITTEE ON THE JUDICIARY, AND

SUBCOMMITTEE ON PUBLIC LANDS OF THE
COMMITTEE ON INTERIOR AND INSULAR AFFAIRS,

Washington, D.C. The subcommittees met, pursuant to recess, at 11:01 a. m., in room 224, Senate Office Building, Senator Joseph C. O'Mahoney, presiding.

Present: Senators Kefauver (chairman of the Subcommittee on Antitrust and Monopoly), O'Mahoney (presiding), and Dirksen, of the Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary.

Senators O'Mahoney (chairman of the Subcommittee on Public Lands) and Carroll, of the Subcommittee on Public Lands of the Committee on Interior and Insular Affairs.

Also present: Senator Wm. A. Blakley. Committee and subcommittee staff members present: Donald P. McHugh, cocounsel, Antitrust; James De Maras, Jr., research consultant, Public Lands; Peter Chumbris, counsel

for minority, Antitrust; Carlile Bolton-Smith, counsel to Senator Wiley; Louis Rosenman, attorney, Antitrust; Paul Banner, economist, Antitrust.

Senator O’MAHONEY. The committee will come to order.

Mr. McHugh, are you ready to proceed? STATEMENT OF FELIX E. WORMSER, ASSISTANT SECRETARY OF

THE INTERIOR; ACCOMPANIED BY HUGH A. STEWART, DIRECTOR OF THE OFFICE OF OIL AND GAS, DEPARTMENT OF THE INTERIOR, AND EDWIN G. MOLINE, OFFICER IN CHARGE, ECONOMIC ORGANIZATION SECTION, OFFICE OF EUROPEAN REGIONAL AFFAIRS, DEPARTMENT OF STATE

Mr. McHugh. Mr. Wormser, in your previous testimony before this committee you stated that "to the extent desired by the Government to enable participants under the plan of action to take part in programs or actions requested by the foreign governments or agencies of foreign governments.”

This was one of your explanations concerning the amendments which were made to the plan of action. You recall there were three specific amendments dealing with various aspects of the plan of action.

The one which I have just referred to you explains the reason behind making certain changes in the plan of action. This would suggest that it was intended by this amendment that the participants in the plan of action would be enabled to enter into some kind of arrangements with foreign governments or agencies of foreign governments

. Now I wonder if you will explain for the subcommittee exactly what type of arrangements were entered into in fact by any of the participants in MEEC, and just what the purpose was behind that amendment to the plan of action?

Mr. WORMSER. Mr. McHugh, I do not recall, nor do I have any knowledge of, any arrangement that these committee members have or may have had with foreign governments.

Mr. Moline of the State Department may be able to contribute something to that, because as far as the external activities are concerned, that is, relationship with the oil interests abroad, that is, companies or countries, we have left that, as you know, to the State Department. So I would suggest that you invite Mr. Moline to perhaps give you something on that if it will help you.

Mr. MCHUGH. I do not know that Mr. Moline is here, Senator. It might be that it will be appropriate to have him give us the benefit of his views, but before he does, I would suggest the Department of Interior participated in the amendments of December 3 to the original plan of action. In the course of your previous testimony, Mr. Wormser, you explained the purposes behind these amendments, which were submitted to the Director of ODM on November 29. So I assume you meant this amendment which would enable MEEC to enter into arrangements with foreign governments was submitted by the Interior Department.

Mr. WORMSER. Now that I am getting my bearings, Mr. McHugh, this was designed to facilitate coordination and cooperation with OEEC in order to consumate the objective of the whole program, that we could get as much oil as possible to Europe with the cooperation of the interests abroad, governmental and private, and our own doinestic facilities here.

Mr. McHugh. It says "with foreign governments." Under this amendment, was it contemplated that any of the companies comprising MEEC would enter into some kind of arrangement with any foreign governments ?

Mr. STEWART. Would you like to have me answer that?

Mr. WORMSER. I think I would refer that to Mr. Stewart, if you don't mind.

Mr. STEWART. Under the plan of action set up on August 10, there was no provision by which the participants in the plan of action could have anything to do with, or have any recognition of, the Organization for European Economic Cooperation, which is that intergovernment agency in Europe, which during September was set up in Europe as the agency which, in the event of an emergency, would allocate oil as between countries.

Now the members of the Middle East Committee, the American oil companies supplying oil in Europe, were almost bound to answer to OEEC in one way or another and to cooperate with OEEC in advising what supplies might be available. And it was considered desirable to expand the organization by inclusion of this amendment.

Mr. McHugh. Before this amendment was adopted, would not MEEC have had authority to cooperate with OEEC in connection with the matters which you have just described ?

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Mr. STEWART. I do not think so; not on a collective basis. The individual companies might, but not on a collective basis.

Mr. McHugh. So that the purpose of this amendment, then, was to permit MEEC, on a collective basis, to enter into arrangements with OEEC as such?

Mr. STEWART. That is right.

Mr. McHugh. And do I understand from this that it was not anticipated that any action would be taken by any individual participant country with any of the foreign governments which might be involved in the Middle Eastern situation?

Mr. STEWART. The individual companies could carry on the same arrangements that they previously had had and traditionally had had with foreign governments, but they could not, under the plan of action, sit down with the foreign governments and advise as a group, advise on problems, or as a group agree that they would channel supplies the way OEEC wanted them channeled.

And it was considered necessary, therefore, to give them the right to sit in with OEEC and assist in the supplying of the information to OEEC and do it on a joint basis, not on an individual company basis.

Mr. McHugh. For the purposes of furthering the objectives of the plan of action, could any of the participant companies in MEEC enter into arrangements with Middle Eastern governments individually, separately, for the purpose of getting oil over there, making any arrangements concerning rerouting?

Mr. STEWART. With any Middle Eastern government ?
Mr. McHugh. Any Middle Eastern government.

The amendment to the plan would seem to be broad enough to permit participant companies in MEEC to enter into some types of arrangements with actual governments located in the Middle East to accomplish some of these purposes.

Mr. STEWART. It might be so construed, but if so, that would be a legal question beyond my knowledge. And the amendment was not designed for that purpose at all. It was designed strictly for the activities which might be required in connection with OEEČ.

Mr. McHugh. Is it true that since the amendment of December 3, which we are referring to, was adopted, there was no action ever taken by any of the MEEC members with Middle Eastern governments to carrry out any of the objectives of this plan?

Mr. STEWART. I do not know of

Senator DIRKSEN. Mr. McHugh, will you let me inquire, just for clarity—there was nothing here, of course, to intrude upon the operations of these companies in their private capacities with respect to producing oil or taking oil out of there. I suppose that they went ahead with their operations, and if they could get oil, put it in tankers, shipped it around the cape. That, of course, they would continue to do notwithstanding. I would assume those operations would go forward?

Mr. WORMSER. That is my understanding. Mr. McHugh. What we are trying to learn, Mr. Wormser, is whether or not, in adopting this voluntary plan, have not you delegated to some of these private international oil companies authority to make decisions affecting the relations of the United States with other foreign governments?

Mr. WORMSER. Mr. McHugh, that goes so deep into legal matters, I certainly do not feel myself competent to answer that. I would certainly refer that to our solicitor, or somebody who has greater knowledge than I have of the implications.

Mr. McHugh. It seems to me this is a serious question to be developed in connection with the significance and the extent of the plan of action which has been adopted, and possibly this is a question which is best addressed to the representative of the State Department, who is here. I am wondering if perhaps we can obtain his views on this.

Mr. Moline is present.

Senator DIRKSEN. In case Mr. Moline does not have the exact language before him, I presume Mr. McHugh is referring to subsection 3 of the statement which was made, which reads, with respect to the plan of action:

To the extent desired by the Government to enable participants under the plan of action to take part in programs or actions requested by the foreign governments or agencies of foreign governments.

So it sems to me that was hedged very considerably, if that was carried out.

Mr. MOLINE. The purpose of the amendment was, as Mr. Stewart said, primarily to provide a means whereby the American companies could cooperate with OEEC, which was getting very actively into the field, particularly in November when we were not starting up our MEÉC and when Europe felt they could not do any meaningful planning without participation of our companies, who have such a large role in the marketing of oil in Europe.

But the amendment is designed, not to permit cooperation with foreign governments, but rather with agencies or organizations desig. nated by foreign governments

, or agencies of foreign governments, and they furthermore must be designated by the Administrator. The only one I understand he has ever designated has been OEEC and its associated Oil Committee, OPEG.

We in State certainly have never felt that by this amendment we were delegating to any oil company the right to carry on our foreign relations for this country, or to be instruments of the evolution of foreign policy. And it has been this limited designation that I mentioned, of just the OEEC complex which I have described in previous testimony.

Mr. McHugh. Mr. Moline, in your opinion, would not some of the authority which MEEC members have in making certain decisions involve such questions as the decision as to what type of a cutback production possibly would have to be made in certain foreign countries, and does not that, in fact, go to the heart of much of the Department's policy in the Middle East?

Mr. MOLINE. I would not agree with that, Mr. McHugh. Certainly the decisions about increasing

and cutting back production are the kind of decisions they have to make all the time in their normal relations. I think if there should be a coordinated decision, that one country would be cut disproportionately to another, or there would be some conscious decision of that sort, and that there would be then a basis for concern.

But I have seen no indication of that sort. As it appears to me apart from the enforced cutback in Iraq by virtue of the disruption of a line

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with no alternative outlet, other than that, the reductions in production in the Middle East have been by and large of the same order of magnitude across the board. And we have not had, either any representations from governments, or any suggestions that there is any lack of understanding about the present position.

Mr. McHugh. A decision to substantially increase production from the gulf to Western Europe would necessarily affect the question of how much and in what countries crude oil is to flow from the Middle East?

Mr. MOLINE. No; but I have never understood that this committee had any right to increase production from the gulf. It is not their decision to say

Senator OʻMAHONEY. May I interrupt? Whenever you say “this committee"

Mr. MOLINE. The MEEC.
Senator O'MAHONEY. Please identify it.
Mr. MOLINE. There are too many committees.

Senator O’MAHONEY. I do not want anybody to think that the Antitrust and Monopoly Subcommittee is doing any of these things.

Mr. MOLINE. I quite understand.

The Middle East Emergency Committee, as I understood it, was, under the approved schedules, only rerouting tankers to make the maximum use of them. But it does not involve decisions to increase production one place in order to cut back elsewhere, or even, as a consequence, to bring about that cutback.

So this issue has just not risen in this particular exercise, at least so far as the State Department has been aware.

Mr. McHugh. Mr. Moline, I direct your attention to minutes of meeting No. 4 of the Middle East Emergency Committee of September 19, 1956, in which, on page 7 this statement appears :

The third problem mentioned by the chairman concerned the distribution of the shut-back in production among the Middle East countries that might be necessary if a Suez stoppage occurs. He pointed out that the increase of 750,000 barrels a day of United States gulf-Caribbean crude availability that had been estimated by the committee as necessary to meet Europe's requirements if Suez were not available, would mean a shut-back of production in the Persian Gulf countries in equal amount. He pointed out that this 750,000 barrels a day would represent a shut-back of approximately 20 to 25 percent of the total Middle Eastern production.

Now again, on page 18, these minutes indicated that this, among other problems, was considered—this is the meeting of September 19, that is, minutes of meeting No. 4.

On page 18 it states : Dr. Flemming stated that the Government agencies concerned would give immediate attention to two problems—the probable increase in tanker rates and crude prices and the distribution of shut-backs in Middle East production. He also stated that he hoped to have a Government position on these problems to present to the committee in the near future.

Mr. MOLINE. We were never asked to make such a judgment or to study that problem, and no guidance was ever given to the committee on this particular problem.

In the first place, you see, out of your 750,000-barrel shut-back that you mentioned, you had 560 of it automatically applied against Iraq just by virtue of a lack of alternative outlets.

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