use, the determination of the amount that the different classes of civilians will get is the business of the O. P. A. We have no part in that determination except as we are called upon to consult with the O. P. A. forces and to give them the benefit of any views or suggestions we may have.

The CHAIRMAN. What amount of the time of your personnel is devoted to rationing problems?

Mr. HOCHULI. Very, very little. I happen to be the representative of the Petroleum Administration for War on the rationing board, and I will say that not more than 2 or 3 percent of my time is devoted to rationing; just when we are called upon to advise or with reference to any statistics we might have.

RATIONING OUTLOOK REGARDING PETROLEUM PRODUCTS

The CHAIRMAN. In view of your intimate and accurate knowledge of the supply and disposition of petroleum products, what is the rationing outlook at this time?

Mr. DAVIES. Well, of course, I want to be careful not to invade anybody else's field; but if you are speaking of gasoline, as I assume you are

Mr. CANNON. Gasoline, particularly, and fuel oil are among your greatest problems in this country?

Mr. DAVIES. Yes.

Mr. CANNON. What about fuel oil-will you be able to do any better than you did last year?

Mr. DAVIES. We will be able to do no better this winter than we did last, so far as fuel oil is concerned.

Mr. TABER. Regardless of the Japanese picture?

Mr. DAVIES. No. Of course, when the Japanese war clears up we will be able to get back to normal.

Mr. CANNON. But the suspension of the European war will not materially assist this winter?

Mr. DAVIES. No; for the reason that in the Pacific there will be increased demand for fuel and Diesel oil.

Mr. CANNON. And gasoline?

Mr. DAVIES. So far as gasoline is concerned, I would say that the prospect is that we may be able to supply, following VE-day, a sufficient additional amount of gasoline for civilian consumption to perhaps enable the rationing agency to increase, as much as 50 percent, the allotment to the ordinary civilian motorists. That does not mean that there will be so much additional that every civilian will get 50 percent more; but, as I say, the ordinary civilian motorist may possibly get as much as 50 percent more, I think.

Mr. CANNON. Following the announcement of the close of war, VE-day?

Mr. DAVIES. Within a reasonable time; 30 or 60 days will be required to readjust and redistribute supplies.

Mr. CANNON. How would you interpret that in terms of the A card? Mr. DAVIES. In terms of the A coupons that would mean 3 gallons instead of 2 gallons per week, if that prospect materializes, and that brings into the question again all of these guesses that we have to go on. But you are asking for my guess, and that is it.

OPERATION OF PIPE LINES

Mr. CANNON. These pipe lines which you have just been discussing were installed as the property of the Defense Supplies Corporation, and R. F. C. subsidiary, which secured the funds from the R. F. C.? Mr. DAVIES. That is the Defense Plant Corporation.

Mr. CANNON. In other words, the pipe line is the property of the United States?

Mr. DAVIES. That is correct.

Mr. CANNON. What returns have there been, and what has been the capacity of the facility since installation?

Mr. DAVIES. At full capacity?

Mr. CANNON. That has resulted in a tremendous saving of cost of transportation and has been a material aid in the solution of the problem of getting oil to the Atlantic coast. So the profits must have been comparatively large. What have been the returns to the Corporation on its investment?

Mr. WILSON. Approximately, Mr. Chairman, the 24-inch line, which was the first of two lines

Mr. CANNON. Both of them were constructed by the same agency? Mr. WILSON. Both were constructed by the same agency; yes; and are owned by the Defense Plant Corporation and are operated for the account of the Defense Supplies Corporation. The Defense Plant Corporation does not operate them. They are operated by Defense Supplies.

Mr. CANNON. Defense Plant owns them and Defense Supplies operates them?

Mr. WILSON. That is correct; and the cost of the 24-inch line was approximately $75,000,000, and the indicated earnings on that line have, according to the Defense Plant Corporation, gone slightly beyond the total cost of the line, so I am informed by Defense Supplies Corporation.

Mr. CANNON. Within what period?

Mr. WILSON. We do not have any part in the fiscal affairs of either line, but I am informed from that source that the indicated operating income, without any allowance for amortization, or things of that kind, has been slightly in excess of the original cost of the line. Mr. CANNON. For what period?

Mr. WILSON. It started operating early in 1943.

Mr. CANNON. Have the returns from that pipe line been paid into a revolving fund or covered into the Treasury, or what has been done with them, if you know?

Mr. WILSON. I do not know. That is a part of Defense Supplies operation.

Mr. CANNON. You do not know what disposition has been made by the Corporation?

Mr. WILSON. I do not know.

Mr. CANNON. Does anyone here know?

Mr. DAVIES. No; I do not, Mr. Chairman.

Mr. LUDLOW. Petroleum Administration for War is for the war activities fully and simply, is it not?

Mr. DAVIES. Yes.

Mr. LUDLOW. And is expected to be eliminated speedily when the war is over?

Mr. DAVIES. Very speedily.

Mr. LUDLOW. Or will there be many outstanding contracts for production, transportation, and the like?

Mr. DAVIES. No; no contracts that run to P. A. W. There will be, of course, records that will have to be transferred somewhere and a certain amount of detail that will take some considerable time to sweep up, but I think that can be transferred on by P. A. W. to some existing permanent department of the Government.

Mr. LUDLOW. For liquidation purposes?

Mr. DAVIES. Yes.

NEW OIL WELLS

Mr. LUDLOW. Are any new wells being brought in all the time while the old wells are going out?

Mr. DAVIES. Yes.

Mr. LUDLOW. Do you have any figures showing the number of known wells brought in during the last year?

Mr. DAVIES. We drilled this last year in the United States a total of 24,000 wells. This year we plan to complete 27,000, and if we are still in business next year we will have to drill possibly even more30,000 in order to offset the decline of wells that are now producing. Mr. TABER. In what proportion would you say the old wells go out in proportion to the new wells-at anything like the same proportion that the new wells are brought in?

Mr. McWILLIAMS. Some of the wells go out in a less proportionate time than the new ones are drilled.

Mr. LUDLOW. What about the development of reservoirs of oilis it your opinion that we have as yet pretty well discovered the oilproducing areas in the United States?

Mr. McWILLIAMS. Thus far we have discovered in this country about 50,000,000,000 barrels.

Mr. LUDLOW. Fifty billion?

Mr. McWILLIAMS. And we have produced about thirty, and the estimate is that we will find some twenty-five to fifty billions yet to discover.

Mr. LUDLOW. Are any new areas being brought in?

Mr. McWILLIAMS. I think we have brought in during the last year, we estimate, about 800,000,000 barrels.

Mr. LUDLOW. You are making borings of new territory all the time? Mr. McWILLIAMS. Yes; what we call the wildcat program is going ahead.

EXPENDITURES TO DATE

Mr. TABER. How much money have you spent out of this year's appropriation down through the 31st of March?

Mr. NEWMAN. We have spent $3,707,000.

Mr. TABER. How much do you feel you are going to spend during the rest of this fiscal year, the other 3 months?

Mr. NEWMAN. $1,209,000.

Mr. TABER. That would mean you will have probably a balance remaining of nearly $1,100,000?

Mr. NEWMAN. That is right.

Mr. TABER. Have you any way of giving us any estimate of your probable month-by-month expenditures during the fiscal year 1946?

Mr. NEWMAN. Nothing other than the approximate level rate; we do not expect any sharp fluctuation aside from the tapering off which may occur when VE-day comes. Following the VE-day we expect a tapering off in our staff. After that we expect the operation to be at approximately the level rate until the fiscal year closes.

EFFECT OF VE-DAY ON BUDGET REQUIREMENTS

Mr. TABER. You kind of figure-or Mr. Davies told us that would be the approximate expenditures on the basis of VE-day arriving before the fiscal year begins.

Mr. NEWMAN. The $4,345,000 estimate which was originally submitted is on the assumption of a two-front war.

Mr. TABER. Yes.

Mr. NEWMAN. The $4,000,000 is assuming a one-front war. A statement on the effect of VE-day on P. A. W. budget requirements follows:

EFFECT OF VE-DAY ON PETROLEUM ADMINISTRATION FOR WAR BUDGET

REQUIREMENTS

The reduction in Petroleum Administration for War expenses which will be possible after cessation of hostilities in Europe depends upon changes in military requirements for petroleum products, military demands for tanker transportation, availability and controls over materials and equipment needed for petroleum operations, manpower shortages and labor difficulties, and similar factors. Such changes are difficult to predict, and consequently our Budget estimates must necessarily be subject to revision as actual conditions unfold. We have appraised the situation as best we can in collaboration with other agencies who have the best available information.

The basic factor influencing our post VE-day activities is that military requirements for petroleum products are more than 200,000 barrels per day larger than present production for the European and Far Eastern wars. In other words, Petroleum Administration for War is in the peculiar position of having to supply more, rather than less, products after VE-day.

Nevertheless, we do estimate that the funds needed for Petroleum Administration for War operations during the next fiscal year will drop to approximately $4,000,000, or $345,000 less than the budget estimated for a two-front war. reduction is anticipated for the following reasons:

This

1. A general easing of materials will probably permit relaxation of controls over the use of materials in the petroleum industry. For example, if Petroleum Administration for War can remove controls over the installation of marketing equipment, a significant volume of work handling requests for exceptions will be eliminated in the District and Washington offices. Similarly, relaxation of restrictions on drilling of new wells will reduce the work load.

2. W. P. B. paper work will probably be significantly reduced. We are advised that the C. M. P. forms will be eliminated and the priority system simplified so that staff will no longer be necessary to handle special rating forms. We will, however, need priority assistance for certain types of materials and equipment which remain scarce, such as oil-country tubular goods and certain types of refinery equipment.

3. Substantial expansion of aviation gasoline refining equipment will not be necessary to meet the most recent estimates of military requirements, provided the facilities now in operation or under construction can be used to the maximum. This will permit a reduction in the staff needed to assist in the construction of such projects.

4. Simplification of foreign materials procedures should be possible after VE-Day. In addition, P. A. W. work for the European subcommittee of the Enemy Oil Committee will no longer be necessary. These reductions, however, will be largely offset by the staffing of technical missions to study German and other European production. These technical missions, which are sent out under the Joint Chiefs of Staff, will temporarily make a sizeable increase in P. A. W. pay roll and travel expenses.

We estimate that these changes will permit a reduction in staff of approximately 125 people, and that expenses other than pay roll can be cut proportionately. The basis of calculation is shown on the attached table.

1 Represents payment to employees to be dropped after VE-day; includes estimate of salary during curtailment of activities and terminal leave.

Mr. TABER. That will allow for a tapering off, assuming a one-front war, all the way through the fiscal year ahead of us, of what amount? Mr. NEWMAN. We include $87,000 in the $4,000,000, for payments of people who will be dropped, and for terminal leave which would accrue to those people.

Mr. TABER. That would allow a slight reduction after 2 or 3 months? Mr. NEWMAN. That is right. We feel that there will be a certain number of people who will continue for 3 months, and by that time. we will be adjusted to a one-front war.

Mr. TABER. Mr. Davies said it would take approximately 3 months to clean up after the Japanese disturbance was quieted down. That would mean a gradual tapering off in that period?

Mr. NEWMAN. Yes. We made, of course, no estimate of what that would be.

Mr. TABER. Perhaps it is not near enough in sight to justify too much of an estimate.

I think that is all I have for the moment.

Mr. WIGGLESWORTH. Mr. Davies, as I understand it from what has been stated you anticipate an unexpended balance of $1,100,000 for the present fiscal year?

Mr. DAVIES. Yes.

Mr. WIGGLESWORTH. And if you add to that $560,000, roughly, for overtime, to your original request of $4,345,000, the total is just about the same figure that you anticipate spending in the current fiscal year, is it not?

Mr. DAVIES. Yes, pretty close to it.

Mr. WIGGLESWORTH. So that the saving resulting after taking the recent revision by the Budget, the over-all saving, in comparison with the actual expenditures or estimated expenditures, would be just about the $345,000?

Mr. DAVIES. I think that is the fact.

Mr. WIGGLESWORTH. When did you present the estimate to the Budget?

Mr. DAVIES. About 2 months ago.

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