Mr. MELCHER. Well, I am not trying to-I have not formed a judgment and I am not trying to arrive at a preconceived judgment. But I am certain that there must have been many decisions made on lowproducing wells, for instance, on whether or not to continue production. And if those decisions were made in concert with keeping the Federal interest involved, too, then I suppose that we have no quarrel. But I am not certain whether they have been made that way and I would like to reassure the public, at least in my own discussion with them, that we have reviewed this and we cannot find anything to be critical of; or we have reviewed it entirely and arem aking these recommendations. So, of course, again we are only referring to shut-in production on Federal land. But if we can assure the public that this has been looked at carefully and recommendations either are needed or are not needed, or corrections should be made, or should not be made, or have been made, then I think we will have gone a great step forward in quieting the suspicion that there is a lot of capped production.

Mr. TURCOTT. Well, with respect to any of the information that U.S.G.S. comes up with on this concerning Federal leasing and wells on Federal leases, I personally would concur that that would be a wise approach. I will bring it to the Secretary's attention that we discussed this here and your views.

Mr. MELCHER. All right, and the committee will expect to have back from you recommendations for correction, or your judgment that you

see no error.

Mr. TURCOTT. Again, I will personally recommend that the analysis that the U.S.G.S. makes, after further review by secretarial officers, be sent to the committee.

Mr. MELCHER. Thank you.

Does the staff have any questions?
Mr. SHAFER. I do not.

Mr. Rock. [Nods in the negative.]

Mr. MELCHER. Thank you very much, Mr. Turcott and all of your associates. The committee appreciates your help on this matter.

Mr. TURCOTT. I thank you, sir, and again I would like to give special recognition for this tremendous job to Miss Doris Koivula, Mr. Fred Ferguson, Mr. Clark Gumm, Mr. John Duletsky, and others.

Mr. MELCHER. The committee will be in recess until Monday at 2 o'clock.

[Whereupon, at 3:45 p.m., the subcommittee recessed to reconvene at 2 p.m., Thursday, March 14, 1974.]

PRODUCTION OF OIL AND GAS ON PUBLIC LANDS

THURSDAY, MARCH 14, 1974

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON PUBLIC LANDS

OF THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS,

Washington, D.C. The subcommittee met, pursuant to notice, at 10:10 a.m., in room 2359, Rayburn House Office Building, Hon. John Melcher (presiding).

Mr. MELCHER. The subcommittee will come to order.

This morning we are meeting on a continuation of our public hearings of H.R. 11840, a bill to review the present and prospective uses of the lands in the United States, and to stimulate the production of oil and gas from such lands, and for other purposes.

We are very fortunate today to have with us as witnesses, people that can truly represent the independent side of the oil business. I am not going to attempt to identify nor to explain just what an independent is as compared to a major oil company, but perhaps some of our witnesses will.

We have held a large number of hearings on this bill and while we have had considerable input from various oil companies, I do not believe we have ever really had the proper guidance from the independents and since independent producers make over three fourths of the discoveries of oil in our country-and I would assume it would be over three fourths of the discovery on Federal lands other than offshore drilling-it is very significant that we have in our hearing record and have for the committee's guidance the suggestions and recommendations of those people directly involved in the business of oil as independent oil producers.

Along with that goes-what about refineries-is there a difference between the refineries that are operated by the major oil companies and those that are operated by the smaller companies?

So we are going to hear from both the independent producers and the independent refiners this morning, and the committee is very grateful to the witnesses and needs this information very badly.

Our first witness is a friend of mine and former colleague in the Montana Legislature, Earl Cranston, from Billings. Earl and I know each other well. He knows all about oil and I guess I know all about being a veterinarian. Those are our respective positions or professions. But Earl and I had the opportunity to work together on many issues in the Montana Legislature, even though he happens to be in the wrong party and I happen to be in the right party, particularly today, particularly in 1974.

41-295-75- -38

Mr. CRANSTON. This year I am taking the fifth.

Mr. MELCHER. Well, nevertheless, issues quite often go beyond parties, generally do, really. The issue involved in the hearing today is how we get more oil production from our Federal lands, gas production from our Federal lands, and on this issue, I do not see any reason for Republicans having one view and Democrats having another, and I do not think that is true. I think we all want to get the facts and then start doing something with a little more speed and a little more directness than we have had in the past. I think Congress can bear a lot of criticism on not getting with this sooner.

The gentleman from California's time for observation.

Mr. JOHNSON. I thought maybe we were waiting for the good news from Venice. During the interim we are going to have some more Arab oil.

Mr. MELCHER. Well, we will take the Arab oil if the embargo is lifted. It is going to be very crucial to this country, of course it is, but what we have been ignoring in this country is the constant decline in domestic production.

I think there is plenty of blame to be shared by all, including those of us in the Congress, and let us see now what has caused this constant decline in domestic production. I know price has a lot to do with it. With improved price, now, we should see a lot more exploration, a lot more development in our own country, but let us see what else is also involved in making the opportunities available for people such as Earl and thousands of others that are in the production side of it to get out and find some more oil and gas right here in our own country.

Whatever the Arabs want to do in world global politics is their own business, of course. I do not think we have any control over them, and I think we can deal with them much better if we deal from a stronger position in the sense of having more production domestically. I think we can get along with them much better if we do so. Earl, we are privileged to have you here, and you just proceed. I am very much interested in your testimony.

STATEMENT OF EARL CRANSTON, PRESIDENT, OIL RESOURCES, INC., BILLINGS, MONT.

Mr. CRANSTON. Thank you, Mr. Chairman.

I am Earl M. Cranston, president of Oil Resources, Inc., which is a Montana based energy company with modest assets and revenues. And our business consists of geologic work and lease acquisition, preparatory to exploration and drilling of oil, gas and recently, geothermal prospects.

And I am going to digress for a minute from my prepared testimony to comment just a little. At the end of my testimony there are going to be some specific recommendations which I make to the committee which do relate to H.R. 11840, but it is true that in response to your opening remarks, Mr. Chairman, I do believe the Public Lands Subcommittee has a great deal to do with our future in the energy business, not just for oil and gas, but on the public lands of the Western States.

Some of my testimony will relate to some of the abuses in that regard, but I did want to emphasize that it is a very important bill that you have here, and it is a very imporatnt period of time which we are going into with respect to the public lands of the, especially the Western United States.

I will now revert again to my prepared testimony.

To put our company in the proper perspective, the last annual report showed that in 1973 we spent $1,456,000 drilling oil and gas wells, or dry holes, I should say, some of them or most of them; $555,000 on oil leases and well equipment, and $586,000 in the geologic, accounting, SEC, FPC, and other expenses supporting these endeavors. In the same year, our oil and gas sales amounted to $586,000 and we obtained funds from the financial and industrial community of $1,623,000 to support these activities.

Our reserves of oil and gas are the equivalent of about 2 million barrels of oil. A good portion of our drilling and production is on the public domain of the Rocky Mountain States, as well as on Crown lands of Alberta and Saskatchewan, which quite closly resemble our public domain.

I am a lawyer by education, but have been familiar with the public domain laws relating to oil and gas since 1949, when I first acquired 40-acre oil and gas lease in Wyoming. Since that time, either working as an agent for my company or for others, or acquiring oil and gas leases for myself, when I operated as an individual, I have been involved in the leasing of several million acres of public domain.

In Montana, Utah, Colorado, Wyoming, and Montana, where my company principally operates, it is imperative that there be orderly leasing laws and regulations, and it is imperative that the public domain be available to all oil operators when the lightning strikes one of our geologists or engineers with an idea that a certain area may contain an energy source of some consequence.

The great supremacy of energy sources that prevailed in the United States for 100 years preceding 1950 was primarily because of the availability of places to drill, and of talented people who wanted to make a profit from the sale of such energy resources. Because of the freedom to operate and the many different, and often divergent ideas that energy finders have had. we became a country with the highest standard of living in the world, far outstripping other societies where governments have not allowed the individual use of public and private lands, and consequently, energy was not discovered in those countries except through governmental enterprise, which by its nature has been inefficient and ineffective, both in those countries and in this country. Since 1950, however, a combination of events has caused this fruitful situation to gradually erode until now the independent operator who has been responsible, to answer the chairman's original question, for 80 percent of our oil discoveries. is in a critical situation relative to the availability of leases on which to drill for energy sources.

Your committee here is charged with the responsibility of maintaining an orderly development of a large portion of the lands on which my company operates, and other companies, the public domain, and I am sure that in examining H.R. 11840, you are discharging that responsibility.