The following table shows the number of companies at various times in the period between 1920 and 1938, the number of miles. operated, a break-down as between gathering lines and trunk lines, and the investment in carrier property.

Number of companies, mileage, and investment in carrier property oil pipe lines reporting to the Interstate Commerce Commission

Now, it might be of some interest to call attention to the last column of the statement I have just introduced, showing the investment in carrier property of these pipe lines. The investment in 1938 was $807,657,235; the investment in 1920 was $340,328,447. That was an increase of 137 percent between 1920 and 1938, indicating the growth of this business.

On the subject of the amount of traffic which is handled by the pipe lines, the following statement was prepared from reports made to the Interstate Commerce Commission, and shows, in barrels, the amount of crude oil and refined oil, the totals between the years 1931 and 1938, inclusive, and shows also for the 2 years 1937 and 1938 the number of barrel-miles handled by the trunk lines. There has been great growth in this traffic, and I think it is interesting to note to what extent the traffic has increased so far as refined oil is concerned.

In 1931 there were 15,658,462 barrels of gasoline transported by pipe line, and that had increased to 65,116,820 barrels in 1938. There had been a substantial growth in the movement of crude; but, of course, the proportion of the increase in the case of crude was nothing like as great as the proportional increase in the transportation of refined oil.

Measured in percents, comparing 1931 with 1938, there was an increase of 70 percent. The increase as to crude oil was 62 percent, and for refined oil 316 percent. In 1931 the refined oil was only 3 percent of the total traffic, but in 1938 it was 71⁄2 percent.

Traffic statistics-Oil pipe lines reporting to the Interstate Commerce Commission

Now, I thought it might be worth while to show to what extent the
rail lines transport oil, both crude and refined, and I have a statement.
bearing on that question. It contrasts the amount of oil handled by
pipe lines with the amount of oil handled by the railroads. An effort
has been made here to translate barrels of oil handled into tons, so
that it may be compared with the movement by pipe lines.

Perhaps it would be sufficient, for my purposes, to say that in 1938
there were 4,000,000 tons of crude petroleum moved by rail as against
118,000,000 moved by pipe line. In the case of refined oil, gasoline, or
products of oil of that classification, there were in 1938, 35,000,000
tons moved by rail and 8,457,000 tons moved by pipe line. The gross
in the amount of refined oil moved by pipe line from 1931 to 1938 is
shown in this statement.

Tons originated of crude and refined oil and other petroleum products-oil pipe lines
reporting to the Interstate Commerce Commission, and class I railways, in
thousands of tons

Tons originated of crude and refined oil and other petroleum products—oil pipe lines reporting to the Interstate Commerce Commission, and class I railways, in thousands of tons-Continued

Pipe line traffic reported in barrels; converted to tons at rate of 6.7 barrels of crude oil per ton and 7.7 barrels of refined oil per ton.

2 Not available.

Source: Reports of the Interstate Commerce Commission.

Senator JOHNSON of Colorado. Is this competition to certain points, or is the territory divided?

Mr. FLETCHER. It is for the country as a whole. That particular statement deals with the transportation in the United States as a whole.

Senator JOHNSON of Colorado. Have you any evidence to show that where gasoline or byproducts are carried by pipe line the price to the consumer is less than when it is carried by rail?

Mr. FLETCHER. No, sir; I haven't any figures of that kind at this time. I think they could be readily developed, but it has not been within the scope of our treatment of this subject to show that. That will be covered, I am told, by another witness.

Senator JOHNSON of Colorado. It would be very interesting in connection with this entire question.

Mr. FLETCHER. That will be covered, I am advised, by one of the other witnesses, Senator. My purpose here is simply to lay a foundation for further testimony.

It might now be worth while also to take a look at the income of the pipe lines; I have, therefore, prepared a statement showing the operating revenues of the common carrier pipe lines reporting to the Interstate Commerce Commission up to and including the year 1938. There are in that statement some outstanding features to which I shall call attention.

In 1925 the operating revenues were $164,644,740. That had grown in 1938 to $228,211,228. The operating expenses are also shown in this statement as varying from $80,000,000 in 1925 to $98,000,000 in 1938.

This statement also shows taxes paid by the pipe lines, and those taxes have substantially increased. I have an idea, although I am not quite certain that I am correct, that by far the greater amount of those taxes were Federal income taxes. I draw that inference from the fact that the net income of those pipe lines has been a very substantial amount, as is shown in the table. That is to say, out of $228,000,000 operating revenue for 1938, their net income was $80,345,000, which is a very handsome showing. While I have an idea that they probably paid local taxes based upon their actual property in the various States, my impression is that the greater part of those taxes shown on the table were Federal income taxes.

241706-40—2

Principal income account items-oil pipe lines reporting to the Interstate Commerce

Year

Commission

1920.

1925.

1929.

1930.

1931.

1932.

1933

1934.

1935

1936.

1937

1938.

1 Not available.

9,940, 023

15, 766, 556

110, 019. 059

217, 192, 354

85, 373, 835

24, 007, 935

107, 810, 584

112, 362, 172 105,942, 558

Source: Interstate Commerce Commission.

Senator JOHNSON of Colorado. You have no evidence at all or comparative statement of local taxes levied against railroads and levied against pipe lines and a statement of the investment per mile?

Mr. FLETCHER. I do have, Mr. Chairman, a statement which shows the mileage, property investment, and rate of return for the railroads of the country in comparison with similar facts pertaining to the pipe lines, which I shall discuss very briefly.

Beginning with the year 1929, this statement shows the miles of pipe line operated and the miles of railroad operated, the property investment of the pipe line and the property investment of the railroads, the net operating income of the pipe lines and the net operating income of the class I railroads, and the rate of return on investment. This is not the only statement I have; it is one of several that I have here.

Of course, I rejoice in the fact that any great enterprise in the United States is prosperous, but I do call attention to the fact that in 1938 these pipe lines had a return of 111⁄2 percent on their property investment as compared with a 1.4 percent return for the railroads as to property investment.

Mileage, property investment, and rate of return

[Oil pipe lines reporting to Interstate Commerce Commission, and class I railways]

I have here also a statement which contains the operating revenues and expenses of the pipe lines and the operating revenues and expenses of the rail carriers and which shows the operating ratio as well as net income after fixed charges.

The railroads in 1938 had an operating ratio of 76.35. That means, of course, the ratio between operating expenses, so-called and gross revenues. Out of every dollar, in other words, taken in by the railroads, they paid out 76.35 cents for the expenses of operation.

Now, our friends operating the pipe lines were able to have an operating ratio in that year, 1938, of 43.27, which means that out of every dollar taken in, they paid out 434 cents for the expenses of operation. The net income of the pipe lines for 1938, after paying fixed charges, was $80,346,000. Unhappily for the railroads, in 1938, after paying fixed charges, they had a deficit of $123,000,000. In 1939 it was a little better; the railroads then had a net income, after fixed charges, of $94,639,000. I do not have the figures for the pipe lines for the year 1939.

Operating revenues and expenses, and net income after fixed charges

[Oil pipe lines reporting to the Interstate Commerce Commission and class I railways]

It might be worthwhile, as a matter of interest at least, to have some information in the record with reference to the ownership of these pipe lines. Fifty-eight companies, as I have said, report to the Interstate Commerce Commission. Forty were wholly owned or were controlled by oil-producing and distributing companies; and those 40 companies operated 89.4 percent of the total crude oil trunkline mileage, 66 percent of the total crude oil gathering-line mileage, and 42.4 percent of the refined oil trunk-line mileage. Those companies owned by the interests that operate them had 88.4 percent of the total investment in pipe-line carrier property. They transported 93.1 percent of the total trunk line barrel-miles of oil, earned 89.2 percent of the total operating revenues, and had 89.8 percent of the total net income earned by the industry.

I have here a table that shows all those ownerships and those various lines and shows the pipe lines which have filed reports with the Interstate Commerce Commission, and the controlling companies, as indicated by those reports.