) COMMITTEE ON APPROPRIATIONS CLARENCE CANNON, Missouri, Chairman CLIFTON A. WOODRUM, Virginia J. BUELL SNYDER, Pennsylvania JAMES M. FITZPATRICK, New York JOHN H. KERR, North Carolina ALBERT GORE, Tennessee ELMER H. WENE, New Jersey CLINTON P. ANDERSON, New Mexico JAMIE L. WHITTEN, Mississippi THOMAS J. O'BRIEN, Illinois JAMES M. CURLEY, Massachusetts JOHN TABER, New York RICHARD B. WIGGLESWORTH, Massachusetts D. LANE POWERS, New Jersey H. CARL ANDERSEN, Minnesota 1145 NATIONAL WAR AGENCIES APPROPRIATION BILL, 1945 97 HEARINGS CONDUCTED BY THE SUBCOMMITTEE OF THE COM- PETROLEUM ADMINISTRATION FOR WAR STATEMENTS OF RALPH K. DAVIES, DEPUTY PETROLEUM ADMIN- AMOUNT OF APPROPRIATIONS FOR 1944 AND ESTIMATE FOR 1945 The CHAIRMAN. Mr. Davies, we have an estimate from the Bureau of the Budget in House Document No. 481 for $6,550,000 for the fiscal year 1945 for the Petroleum Administration for War. Your regular appropriation for 1944 was $5,473,000. You received in the first deficiency bill $597,000 for war overtime pay, or a total of $6,070,000 for the fiscal year 1944. You are asking now for an increase of $480,000 for 1945 over the appropriation for the last fiscal year? Mr. DAVIES. Yes, sir. The CHAIRMAN. I wish you would give us a statement, if you will, Mr. Davies, about your work, the purpose of your work, being, as I understand it, first, to provide an adequate supply of petroleum and petroleum products for the armed forces and for war industries, and for domestic consumption. 1 You have jurisdiction of all the domestic and foreign supply and the integration of foreign with domestic supply, and the allocation of petroleum and petroleum products to the United Nations' needs. GENERAL STATEMENT Mr. DAVIES. Yes. Our office was created to direct and to coordinate the activities of the petroleum industry, world-wide, that is, insofar as American companies operating either domestically or abroad are concerned. That was the purpose for which the office was originally created, and it remains the purpose. The office is now nearly 3 years old. We started in May 1941 as the Office of Petroleum Coordinator; later we became the Petroleum Administration for War. SIZE OF JOB The size of the job might perhaps be expressed in terms of the size of the industry that we are required to direct and coordinate. The petroleum industry is, I think, the second largest industry in the United States. Mr. SNYDER. What is the largest? Mr. DAVIS. I guess the railroads are the largest. The petroleum industry has a capital investment of something over $10,000,000,000. Another way of expressing the size of the job, particularly today, might be in terms of the military demand, which is today something over 1,300,000 barrels per day. The total daily utilization of crude oil and natural gasoline in this country is roughly 5,000,000 barrels. The difference between 1,300,000 and the 5,000,000 represents, of course, the industrial and civilian demand. But the oil industry consumes each day 5,000,000 barrels of petroleum, and that is a considerable operation. ORGANIZATION OF PETROLEUM ADMINISTRATION FOR WAR In order to do our job we have created an organization that amounts, in terms of people today, to 1,372. We are undermanned. That is a smaller number of men than was provided for in the budget. We have not been able to recruit a complete organization. As a matter of fact, we have lost more men in recent months than we have been able to employ. We have had, over the past year, an average of 1,415 people, and, as I say, today, we have 1,372 people, and the budget estimate we are now presenting calls for 1,479, or 107 more people than we have on our pay rolls as of today, or 64 more people than we have had as an average for the past year. NUMBER OF OFFICES We have a central office and five regional offices. Our organization is divided into five divisions, domestically: the Production Division, dealing with crude oil production; the Natural Gas and Natural Gasoline Division; the Refining Division; the Supply and Transportation Division; and the Distribution and Marketing Division. Then, in addition to that, we have a foreign branch composed of three divisions, Production, Supply and Distribution, and Refining. The present budget, that is, the one we are submitting this morning, is, as you pointed out, Mr. Chairman, some $480,000 more than the amount spent last year. That additional amount results principally from an increased number of employees. As I say, there are 64 more than the average we had in this past year. It also results from an increase in salaries, which naturally results as the agency grows older. The $480,000 is accounted for, 50 percent by the one cause and 50 percent by the other. METHODS OF ECONOMIZING Over the years, I think we have taken advantage of all our opportunities to economize. There have been opportunities for doing that, as we have better stabilized our operations. For example, we have found it possible to consolidate certain of our divisions, such as the Supply and Transporation divisions. We now have a Supply and Transportation Division, as against a separate Supply Division and a Transportation Division, as we have had in the past. We have just recently placed distribution in the Marketing Division, so we have a combined Distribution and Marketing Division. In that way and in other ways we have, as I say, been able to introduce certain operating economies. I would like to point out, again, gentlemen, what we have mentioned on previous occasions, and that is that a very large part of the work in the United States is done not by our organization here but by the oil industry committees that we have organized over the United States. We have committees dealing with all phases of the industry in all sections of the country, and including foreign operations-committees and subcommittees numbering thousands of men. These people are giving their time to our work without compensation, and I should like to add that they have contributed in a very important way to the success of our petroleum operation. So, were we asking for a budget to enable a Government organization to do this whole job, it would be not $6,550,000 but many times more than that. On the other hand, of course, we must look to the industry to advise and to produce plans as we call for them, and to make recommendations and carry on analytical and developmental work of one kind and another, always under the supervision of the Government forces. We in Government have the responsibility and we cannot delegate it. So, of necessity, we must have a considerable force to assume that responsibility. We have never wanted more than such a necessary force. We have wanted to keep to an absolute minimum, and I think the figures we are submitting today do represent that, and not more than that. ACTIVITIES OF PRINCIPAL DIVISIONS I might comment briefly on the activities of the principal divisions. The heads of those divisions are here with me this morning and they can more fully develop any features in which you are specially interested. WORK OF PRODUCTION DIVISION Commencing with the Production Division: The domestic petroleum production today is at an all-time high; 4,700,000 barrels of liquid petroleum is produced each day, domestically. That compares with a total production of, roughly, 4,000,000 barrels before the war. The 4,700 barrels represents about all the oil that can be produced in the United States at the present time without exceeding efficient rates of production. The principal exception is the west Texas area which could contribute another 175,000 barrels a day, roughly, but we do not yet have the transportation facilities with which to move this volume of oil to refineries. Pipe line facilities for this purpose are under construction and will be completed in the next few months. There is an additional 25,000 barrels a day in the Rocky Mountain area, and that also will be utilized as soon as the transportation facilities now under construction are completed. But, with the exception of that 200,000 barrels a day, the U. S. A. is producing every day all the oil that the wells of the country will produce without doing serious damage to the underground reserve by inefficient operation. Thinking for the moment in terms of production versus consumption, the total consumption is, roughly, 5,000,000 barrels a day, or, roughly, 300,000 barrels a day more than we are producing in this country. The difference of 300,000 barrels is made up by importing, roughly, 150,000 barrels a day and drawing on inventory for the other 150,000 barrels a day. LAG IN NEW DISCOVERIES OF OIL New oil discoveries are considerably behind consumption. We are finding less than we are currently consuming. The new discoveriesand by "new discoveries" I mean new pools discovered, not the expansion of existing known pools-have amounted over the past year to about one-half of the consumption. We are falling behind to that extent at the present time. In normal times we drill about 32,000 wells a year. In view of the shortage of materials we have not been able to keep up that rate since the war started. Last year we drilled, not 32,000, but 19,000. Over the coming year we hope to drill 24,000. But at the present rate we will not succeed in doing that, largely on account of the shortage of manpower, and we are apt to finish the year with 22,000 new wells than with the planned 24,000. Of that number, we had hoped that as many as 5,000 wells might be wildcat wells, because we are putting emphasis on the need for new discoveries. But, again, we feel that we may not be able to meet that figure. It is more apt to be 3,500 or 4,000. We are encouraging wildcatting operations in every way we can, by every means at our disposal. We give special priorities to materials for wildcatting, and we have from the start. Likewise, we do all we can to make available the necessary manpower for wildcat activity. We recommended an increase in the price of crude oil for the purpose of providing further incentive for wildcatting. At least, that was one of the principal purposes. Our recommendation has not succeeded, |