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FEBRUARY 27, 28, MARCH 5, 6, 7, 8, 20, 21, AND 22, 1957

Printed for the use of the Committee on the Judiciary and the

Committee on Interior and Insular Affairs

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COMMITTEE ON THE JUDICIARY

JAMES 0. EASTLAND, Mississippi, Chairman ESTES KEFAUVER, Tennessee

ALEXANDER WILEY, Wisconsin OLIN D. JOHNSTON, South Carolina WILLIAM LANGER, North Dakota THOMAS C. HENNINGS, JR., Missouri WILLIAM E. JENNER, Indiana JOHN L. MCCLELLAN, Arkansas

ARTHUR V. WATKINS, Utah JOSEPH C. O'MAHONEY, Wyoming

EVERETT MCKINLEY DIRKSEN, Illinois MATTHEW M. NEELY, West Virginia JOHN MARSHALL BUTLER, Maryland SAM J. ERVIN, JR., North Carolina

ROMAN L. HRUSKA, Nebraska

SUBCOMMITTEE ON ANTITRUST AND MONOPOLY

ESTES KEFAUVER, Tennessee, Chairman THOMAS C. HENNINGS, JR., Missouri WILLIAM LANGER, North Dakota JOSEPH C. O'MAHONEY, Wyoming

EVERETT MCKINLEY DIRKSEN, Illinois MATTHEW M. NEELY, West Virginia ALEXANDER WILEY, Wisconsin

DONALD P. McHUGH, Counsel

COMMITTEE ON INTERIOR AND INSULAR AFFAIRS

JAMES E. MURRAY, Montana, Chairman CLINTON P. ANDERSON, New Mexico GEORGE W. MALONE, Nevada HENRY M. JACKSON, Washington

ARTHUR V. WATKINS, Utah JOSEPH C. O'MAHONEY, Wyoming

HENRY DWORSHAK, Idaho ALAN BIBLE, Nevada

THOMAS H. KUCHEL, California RICHARD L. NEUBERGER, Oregon

FRANK A. BARRETT, Wyoming JOHN A. CARROLL, Colorado

BARRY GOLDWATER, Arizona FRANK CHURCH, Idaho

GORDON ALLOTT, Colorado

SUBCOMMITTEE ON PUBLIC LANDS

JOSEPH C. O'MAHONEY, Wyoming, Chairman CLINTON P. ANDERSON, New Mexico HENRY DWORSHAK, Idaho ALAN BIBLE, Nevada

THOMAS H. KUCHEL, California RICHARD L. NEUBERGER, Oregon

FRANK A. BARRETT, Wyoming FRANK CHURCH, Idaho

GORDON ALLOTT, Colorado

II

CONTENTS

FEBRUARY 27-MARCH 21

Abernathy, Jack H., vice president of Big Chief Drilling Co., Oklahoma

City, and president of American Association of Oil Well Drilling Con- Page tractors.

1338 Brazell, Reid, president, Leonard Refineries, Inc., Alma, Mich--

1378 Clark, Lester, Breckenridge, Tex.; accompanied by Street, Bruce, Graham, Tex.--

934 Coleman, Stewart P., chairman, Middle East Emergency Committee; accompanied by Hamilton, Fowler, counsel -

1002, 1045 Cresente, James V., executive secretary, the Cleveland Independent Gaso

line Dealers Association, Inc., Cleveland, Ohio; accompanied by Thiel, Joseph A., attorney--

913 Davies, F. A., chairman of the board of the Arabian-American Oil Co.;

accompanied by Duce, James Terry, vice president, and Erskine, Douglas, tax counsel.---

1391, 1479 Delaney, W. A., Jr., Ada, Okla

875 Eddy, George, Alexandria, Va----

1443 Glasco, Lowell M., vice president, West Coast Pipeline Co., accompanied

by Studdert, William W., president, Studdert Engineering Co., Midland, Tex.; and Morison, H. Graham, counsel--

1541 Jennings, B. Brewster, chairman of the board, Socony Mobil Oil Co.;

accompanied by Schmidt, Herman J., general counsel; Ingraham, A. C., Mobil Overseas Oil Co.; and Scott, John J., counsel

1505 Kerr, Hon. Robert S., United States Senator from the State of Oklahoma - 873 Lundvall, Arthur E., chief accountant, Federal Trade Commission--- 1195 MacDonald, Seth, Federal Trade Commission.-

1232 Monroney, Hon. A. S. Mike, United States Senator from the State of Oklahoma.

874 Rathbone, Monroe J., president, Standard Oil Company of New Jersey;

accompanied by Campbell, Nicholas J., Jr., associate general counsel. 1002, 1045 Schultz, Paul, president, Oklahoma Independent Petroleum Association. 977 Whiteford, W. K., president, Gulf Oil Corp., Pittsburgh, Pa.; accompanied

by Rhoades, R. O.; Guzzo, C. J.; McGranahan, Ray; Edwards, W. B.; and Scoffield, F. L

1256

PROCEEDINGS

Hearing of

February 27-
February 28
March 5..
March 6-
March 7-
March 8
March 20.
March 21.
March 22

Begins on page

873 913 1001 1045 1255 1337 1391 1479 1541

Pt. 2

DIGEST OF TESTIMONY

WEDNESDAY, FEBRUARY 27, 1957
Statement of Hon. Robert S. Kerr, United States Senator from the State
Page of Oklahoma
873 Wanted “the record to show that the Oklahoma congressional delega-

tion, including myself, support the position taken by Mr. Delaney today,
and Mr. Paul Schultz, tomorrow.”
Statement of Hon. A. S. Mike Monroney, United States Senator from the

State of Oklahoma 874 Expressed his thanks to the committee "for the searching inquiry

that they are making not only into the effect of imported crude oil on the American market but also on the difficulties of the independent petroleum producer in competing with foreign oil, and in their willingness to invite the leaders of our independent oil industry here, to hear their experience and to document their case of higher costs of production that have been occasioned by the general inflationary trend in almost everything that goes into the oil-production field.”

Statement of W. A. Delaney, Jr., Ada, Okla. 875 Statement of identification.

He operates, and speaks, as an individual, not as a corporation, except in the natural-gas field. He is president of the Louisiana & Nevada Transit Co. Is actively interested in the conservation of oil and gas

resources. 876 “The seizure of the Suez Canal and its subsequent closure by military

action, together with sabotage of pipelines in Syria, has created a condition without parallel in the oil industry.

Believes the domestic industry "has performed creditably since the Suez Canal was closed.” However, “inability to produce more oil in the United States stems from both its unavailability and from what may have been an overoptimistic appraisal of the productive capacity

of the industry.” 877 “The reserves of west Texas and New Mexico, in large part, might

just as well be located in Iran as far as their availability at needed points of delivery is concerned * * *."

So much reliance has been placed on imports that the domestic transportation system is inadequate.

The major pipelines servicing major producers in Oklahoma are controlled by major oil companies because no one else can build them. "* * * the reason why a group of independents cannot get together and build an oil pipeline is that they lack terminal markets." These markets are largely controlled by the majors. Those who "supply those markets with foreign crude are thereby able to depress and restrain the construction of pipeline-transportation facilities by people who do not own large segments of terminal markets."

Does not mean to imply this is the result of a conspiracy. This

situation does not obtain with regard to natural gas. 878 As imports have increased domestic reserves have decreased in

comparison to demand. 879 Due to the world pricing system, based on the gulf price, the cost of

Mideast oil in New York City would be only slightly lower than that produced in the United States, even though Mideast production costs are far less.

* *

IV

Page 880 If a scarcity of a product like oil is created "through the restriction of

market demand, that will have the effect to maintain a price level in our country.” As long as imports can be delivered at a lower cost the companies will bring them in. However, in his opinion the difference is not reflected in consumer prices “because the gallon of gasoline that is refined from a barrel of Texas crude or a barrel of Oklahoma crude or a barrel of Wyoming crude in New York sells for identically the same price as if it had been refined from a barrel of Venezuelan crude, Sumatran

crude, or crude from the Middle East." 881 International companies can maintain high profit margins because if

price goes down on one thing it can be maintained or raised on another.

Discussed production in Oklahoma and showed "some of the reasons

why we are living off the fat of previously accumulated reserves." 883 Record of court case involving Gulf Oil Corp. and the Oklahoma

Corporation Commission together with the decision in the case discussed. 884 If Gulf's position is sustained in the Supreme Court "that is the end of

State regulation of the petroleum industry.' 885 It would mean that there would be no way in which “the marketable

oil in any State having regulations could be put into interstate commerce against the will of the purchasing companies. Senator O'Mahoney asked if that meant that "every State which has oil reserves would therefore be dependent upon the ruling of the major corporations engaged in foreign commerce unless Congress should act."

Mr. Delaney replied, “That would be true as far as the regulated States are concerned. * * *"'

The Senator said the type of situation where buyers controlled the independents' market had prompted him a few days earlier "to warn the major oil companies that unless they adopt a completely fair attitude toward the independent producer and the independent refiner, the call for Federal regulation much more rigid than, perhaps, might be necessary, would have to be met."

Mr. Delaney said he "would oppose with every ounce of ability that I have the establishment of any form of Federal control cast in the mold of such agencies as the Interstate Commerce Commission, the FCC or Federal Power Commission." Stated his reasons. One of them was lack of understanding on the part of the independents of the relief that is available to them through administrative procedures. Another is that many of them are afraid "to take a position before an administrative agency against one of these major companies because of fear of reprisals.” If the do go before an administrative body, they are usually represented by counsel that cannot equal the resources of the major companies, so

get beaten. 886 "Now as far as the public is concerned, the problem of policing the oil

industry with all its ramifications would make it utterly impossible, in my opinion, for any form of Federal regulation or control such as is applied by Interstate Commerce Commission to be effective."

However, he believes that by strengthening, if necessary, the Sherman Act and seeing to it that prosecutions are vigorously concluded under it against those who endanger the national security of the Nation or restrain the commerce of the country through importation of oil or any other commodity over and beyond the point necessary to meet the normal requirements of the country where they act simultaneously, should be subjects for investigation.'

Resumed discussion of crude production. 889 Copy of the appearance sheet at the market-demand hearing held in

Oklahoma City on December 27, 1956, for the purpose of fixing the allowable oil production for January 1957, inserted at this point in the

record. 890 Outlined for the committee the additional burdens imposed on an

independent producer when the common purchaser doesn't take his oil. 891 The purchasers, “in order to keep from assuming the obligation of a

common purchaser under the law," require the producer to sell his oil to a trucking company and then agree to buy a certain amount from the trucker. “They are thereby enabled to control the amount of oil that you sell from your well by simply telling the trucker that they won't take more than X barrels next month, they are going to have to cut back on their field outlet." This is “fairly common practice.”

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