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body has got to stop somewhere. You efficient managers of giant corporations that operate all across the world, if you don't know how to do it, who is the capitalistic leader that will come before us and tell us how to do it?
Mr. FOLEY. We are working on it all the time. Senator O’MAHONEY. You write me a letter about it, will you please, and maybe Foley and O'Mahoney will come up with something.
Mr. FOLEY. I would hope so, Senator.
Mr. McHugh. Mr. Lilley, on page 3 in your statement you refer to certain arrangements, presumably pursuant to the plan of action which involved exchanges, enabling you to make diversion of tankers to Western Europe. I wonder if you would explain for the committee the details of any one of these transactions, and tell us precisely who was involved, what oil was shipped where, and how those arrangements were worked out.
Mr. LILLEY. Just a minute. I think we can get you the detail. There were only two principal exchanges involved in this. One is with Socony Mobil and the other is with Shell Oil Co.
We had available certain crude at the Sidon terminus of the TransArabian pipeline, and that was more suitable from the transportation standpoint for the eastern Mediterranean, places such as Italy, and there was certain crude available on behalf of those two companies in Venezuela, or the Caribbean. The objective
Mr. McHugh. What is the date of this?
Mr. LILLEY. Let me see here; November 1, 1956, was the first understanding with Shell to work out this arrangement.
Mr. McHugh. This crude that you are speaking of that was available to Sidon, that was destined initially for the United States east coast?
Mr. LILLEY. Some of it was going to the United States east coast. As far as the Texas share, it was designed to go to the United States east coast or to Canada. Certain quantities at Sidon were used by one of our affiliates for Western Europe.
Mr. McHugh. Instead of routing it to the United States east coast, it was sent to some of the Western European countries; is that right!
Mr. Lilley. Yes. As I said earlier, primarily it did not go to Western Europe as much as it did to the countries in the Mediterranean because that constituted a maximum tanker saving as you can appreciate.
Mr. McHugh. I wonder if you can complete your explanation of what the details of your arrangements were with the other companies involved.
Mr. LILLEY. To be candid with you, I don't handle the details of such arrangements as that. These were worked out through our supply and distribution subcommittee and through our supply and distribution department. Our objective, of course, in gathering our statistics through the MEEC was to find out where we could make eliminations of this kind and we found there was a potential one here with Shell which would save tanker transportation, to make more tankers available which, in turn, could move more product or crude to Europe.
Working on that basis through the data supplied by the MEEC, we just found that Shell might be in a position to make such an exchange, negotiated directly outside the committee with them. I was not a party to those particular negotiations.
Mr. McHugh. These arrangements with Shell in the early part of November were previous to the time of the enactment of schedule 1 or 2, which specifically authorized you to make such types of transaction?
Mr. LILLEY. That is right. This is a commercial arrangement which we entered in order to try and supply our customers, and clients, in the European area to the maximum extent possible, and to do that, we needed more tanker tonnage, and that saving accrued from that.
Mr. McHugh. Did you advise the Middle East Emergency Committee in advance of these arrangements?
Mr. LILLEY. It is my impression that at the time the MEEC was not operative, except as a
Mr. McHugh. It was in existence, though?
Mr. LILLEY. It was in existence but not activated until about December 7, as I recollect.
Mr. McHugh. Was there any question in your mind of the legality of entering into an arrangement of this nature at that time?
Mr. LILLEY. No, sir. I don't think there is any question of that. This is an exchange arrangement which doesn't involve any particular unusual action, as I see it.
Mr. McHugh. There is no question that the action which you were taking at that time was not within the immunity conveyed by the approval given by the Attorney General to the voluntary plan of action under the Defense Production Act?
Mr. LILLEY. I am not sure I have that question straight.
Mr. McHugh. There is no doubt in your mind that the action taken by you at that time in connection with this exchange was not clothed with any immunity from antitrust prosecution?
Mr. LILLEY. I would say it was a normal commercial transaction and in normal commercial channels.
Mr. McHugh. It is subject to the antitrust laws?
Mr. LILLEY. That I am not in a position to say. I am not a lawyer and I am not in a position to judge that.
Mr. McHugh. Mr. Lilley, do you own crude which you produce and refine in the Caribbean?
Mr. LILLEY. Does the Texas Co. own crude?
Mr. Lilley. Yes; we do have some crude but not a very substantial quantity by comparison with the European requirements of our affiliates.
Mr. McHugh. Since the early part of December when the Middle East Emergency Committee was activated, has the Texas Co. imported into the United States crude or petroleum products from Venezuela?
Mr. LILLEY. Yes; they have.
Mr. McHugh. Can you explain for the subcommittee why you continue to import from the Caribbean and not ship directly to Western Europe if that was the purpose of the plan?
Mr. LILLEY. Well, let me explain it this way: To start with, you have to understand the tanker routes involved. The saving by routing a tanker from the Caribbean to Europe versus taking it, say, from
the gulf coast of the United States is a comparatively small tanker saving
Mr. McHugh. There is some saving!
Mr. LILLEY. There is a fractional saving but it is very small. As a matter of fact, in the total movements which are presently going into this east coast area today—this is a little bit off-the-cuff figureI think you might save something like 10,000 barrels a day in tanker time.
Now, 10,000 barrels a day, I should say in movement, which is a fractional percentage of the total lift, a very small percentage, well under 1.
Now, I would like to say there are also other factors in running an oil business other than purely transportation, as you, of course, recognize. There are factors, such as the continuing availability of source of supply of a particular type of crude to your operations. There are such factors as the quality you need to run for a certain given end product end result. There are many others like that I could elaborate on, and all of those have a bearing on this type of thing.
Mr. McHugh. Would it have been possible for the Texas Co. to have increased its production of crude in Venezuela?
Mr. LİLLEY. I would say not, sir. I don't have anything to do directly with the Venezuelan operation, but it is my impression that we have been producing to the maximum consistent with our facilities, and good oilfield practice through the Caribbean, and I might add, too, also one thing I didn't mention in my brief statement.
There has been some difficulty in getting American-flag ships in position at the time required if you want to make more shipments from the gulf to the east coast.
Mr. McHugh. When you speak of production, and, as I understand it, with your facilities you are referring, among other things, to tanker facilities
Mr. LILLEY. I did not have particular reference to tanker facilities, no. I had reference primarily to the operations in our Caribbean area affiliates and subsidiaries; the fact that they generally at a time like this, when we need the crude, would produce up to what good oilfield practice would constitute.
Mr. FOLEY. We are producing in Venezuela every last barrel we can get out of the wells, and that is true in Trinidad and Colombia as well. There isn't a spare barrel that we could get that we are not taking.
Mr. McHugh. So it would not have been possible for your company to have made any further diversion of its Middle East shipments or the tankers used in its Middle East haul to Venezuela for shipment directly to Western Europe?
Mr. FOLEY. That is correct.
Mr. McHugh. In connection with any of these exchange arrangements which you have described, Mr. Lilley, are there involved some
, type of financial setoffs with the companies which might involve, say, sharing of distribution or expenses?
Mr. LILLEY. As I have told you already, I am not a party and have not been a direct party to negotiations, to negotiate these. They are done through supply and distribution channels, but normally, describing how a thing like this should operate, I would presume that if there were a freight saving involved, there would be some manner of
arrangement whereby that freight saving could be apportioned. I don't know exactly how it would take place.
Mr. McHugh. As apportioned among the Mr. LILLEY. The two persons doing the operation, I would presume. I have not had direct access to this information.
Mr. McHugh. Senator, in this connection, I wonder if it would be appropriate for the Texas Co. to furnish the committee the specific details in connection with these two transactions which Mr. Lilley has referred to.
Mr. LILLEY. Would you like us to put those in the record ?
One last question. The arrangements which are referred to here, the specific transactions which the members of the Middle East Emergency Committee engaged in pursuant to these various schedules, are they worked out at meetings of MEEC?
Mr. LILLEY. The schedules themselves?
Mr. McHugh. No. The individual transactions taken pursuant
Mr. LILLEY. No, sir. Mr. McHugh. Pursuant to the schedules. Mr. LILLEY. The individual transactions are not done in the MEEC. Mr. McHugh. Where are they done? Mr. LILLEY. As I understand it, the base data supplied by the MEEC goes to the supply and distribution department of individual companies which then attempt from their base data to see what can be done on an individual basis.
Mr. McHugh. You mean, they would be negotiated by conferences in the offices of the companies involved?
Mr. LILLEY. No, sir. I would not say that.
I would say that one individual company would attempt, based on the data available, to work out an arrangement to save tankers with another individual company.
Mr. McHugh. Where would that be done?
Mr. LILLEY. I would presume they might do it in one office or another of the companies. They might do it by telephone, as far as I know. It would not be done in the MEEC.
Mr. McHugh. It would not be done under the supervision of MEEC or any of the subcommittees of MEEC?
Mr. LILLEY. Not as I understand it.
May I say that I did not come here fully prepared to talk on all the details of the MEEC operation. Mr. Coleman, as chairman of that committee, I believe has a much more elaborate authoritative statement than mine on this subject. I primarily came here to tell you our particular position, and I haven't all the background necessary on this subcommittee or the supply and distribution operation to fully inform you. I will be glad to get it, to get you any data you need, if Mr. Coleman doesn't give it to you.
Mr. McHugh. As the Senator stated, we expect to hear from Mr. Coleman subsequently. In that connection, Senator, I think it might be appropriate for the company to withhold the submission of information we have just requested until we have completed the testimony of Mr. Coleman and some of the other MEEC members, to determine whether or not we may have the information we need or we may be able to get it at that time.
Senator O'MAHONEY. I think the information we asked this afternoon
Mr. McHugh. I was just referring to our request to have them describe the details of these two particular transactions.
Senator O'MAHONEY. Well, that is all right.
Mr. McHugh. It may be possible that Mr. Coleman would be able to furnish that information, and, if not available, Senator, we can request it again.
Senator O’MAHONEY. Again I thank you for your patience in staying with us so long. We are very grateful to you, Mr. Foley, and to you, Mr. Lilley, for your readiness to answer our questions.
Mr. FOLEY. It has been a privilege and a pleasure to be here.
The committee will adjourn now, at the call of the Chair, but the probability is that that call will not come until Wednesday, next. There are some witnesses whom we had hoped we might reach today, but it has been impossible to do so, for obvious reasons. Mr. Cresente of Ohio had requested to be heard, but we could not reach him, and we beg his pardon. The committee now stands in recess, at the call of the Chair.
(Whereupon, at 6:30 p. m., the subcommittees recessed, subject to the call of the Chair.)