facilities for the movement of material and supplies for production, and other activities; and we are happy to have been able to furnish a large percent of the volume of freight moved by railroads in our territory; but we strenously oppose passage of a law to impose upon us unnecessary and expensive burdens which will cause us serious economic loss and which will increase the cost of our products to the consuming public. We believe that if the bill should be enacted and the law administered in a manner to result in substantial diversion of crude-oil movement from pipe lines to the railroads, it would actually injure the producers and would result in a decrease in volume of railroad tonnage from oil-producing activities. Certainly it would discourage wildcat exploration efforts, since the uncertainty of obtaining pipe-line facilities would remove a major incentive to the search for new pools. No new oil field can compete in the market with older producing areas, if compelled to ship its production by rail. The tonnage available to railroads, following the discovery of new oil pools, growing out of the needs for materials and supplies for drilling operations as well as pipe-line construction, has been an important source of revenue to the railroads serving the oil producing States. Any law which tends to slow down the development of new fields will, in like ratio, tend to dry up this source of revenue for the railroads. Oil producers do not appear here in opposition to employment of men in railroad operations, but would like to see such employment increased rather than diminished. However, we do vigorously object to being compelled by law to impair efficiency, discontinue progress, pay higher freight rates, and assume other unnecessary burdens, with inevitable loss to ourselves and the consuming public, merely to provide a private subsidy to inefficient and high-cost transportation of petroleum and its products by railroads. We assume that the railroad employees would not expect or demand revenues which they cannot earn in fair competition with other methods of transportation. In these days when the mind of the nation is focussed on the important question of national defense, it is appropriate to consider the fact that an adequate supply of petroleum products and fully efficient transportation facilities therefor occupy a position of first magnitude in consideration of the national welfare. Oil producers are proud of their ability to furnish immediately any quantity of such products which may conceivably be needed. The pipe-line companies are likewise prepared to move our oil safely and promptly to any desired refinery destination; and through use of gasoline pipe lines they can greatly facilitate the safe and quick movement of refined products to points they serve. It should be borne in mind that, in event of war, the railroad facilities will be heavily burdened with the movement of men and supplies, other than petroleum products which move by pipe line. This was fully demonstrated in the last World War. Pipe lines which are buried in the ground are less vulnerable to attack from the air than railroads or other means of transportation. No legislation such as Senate bill 3753 should be enacted which would impose additional burdens or otherwise impair the pipe lines as a means of transporting petroleum and its products in the event of a national emergency such as war. Surely, no serious consideration will be given by Congress to a proposal which cannot possibly benefit those whom the law seeks to 241706-40-11 regulate nor affect in any helpful manner either the shippers of petroleum and its products or the consuming public, but must inevitably injure both. Thank you, Mr. Chairman. Senator JOHNSON of Colorado (chairman of the subcommittee). Thank you, Mr. Hunter. Senator Schwartz, do you have any questions? Senator SCHWARTZ. No; I have no questions. Senator JOHNSON of Colorado. Well, Mr. Hunter, thank you very much. Mr. HUNTER. Mr. Chairman, before I leave, I had just a word to say, here, in response to a question that was asked by Senator Reed. Senator JOHNSON of Colorado. Certainly. Mr. HUNTER. I am sorry he is not now here. That is the question with reference to the differentiation of the gathering lines and the trunk lines. Senator JOHNSON of Colorado. Yes. Mr. HUNTER. I make this statement purely from the standpoint of a producer-which I am; I have no interest in the pipe lines as such. But as a producer of oil, it is well to remember, in arriving at the answer to his question, this fact: That the sale of the oil is made by the producer at his well, to a purchaser who has refining facilities or other market outlets somewhere down at the end of the transportation system. This oil, then, is delivered by the owner of the well simply in his tank, to which he pumps it or allows it to flow, on his immediate lease; and the purchaser, utilizing the facilities of the pipe line, takes it right there at the lease-tanks, simply by turning the valve. That is the last thing that the producer has to do with it—that is, except to get his money promptly, which he can always do, under that kind of system of sale. Therefore, the gathering lines are indistinguishable from the trunk lines, in the mind of the producer, in any practicable sense whatever. Senator SCHWARTZ. That is, in the minds of most producers? Mr. HUNTER. All independent producers and all producers except those who might own the pipe lines. Senator SCHWARTZ. No; there are producers who use a pipe line to carry the oil to their own refineries. Mr. HUNTER. That would be true if the producer used the pipe line to carry oil to his refinery; but then he might know that the practical delivery process would be the same, even in his case. I have a few little wells scattered around here and there, in different places; and I do not know the extent or the location of what seem to be referred to as the gathering systems. I do not know about it in any way whatever; I am wholly not concerned. Only if the points he raised should be carried through and the gathering lines, as he seems to think of them, should be exempt from the provisions of this similar to spur tracks on a railroadthe producer would not be benefited by such an act for this reason, in addition to the one I have already given you: They are all one and inseparable; but no gathering system would be installed by a pipe line unless the pipe line had received permission to construct a trunk line. There is no way by which anyone can be compelled to install gathering lines; and while this will have to remain as a state ment of practical fact, the gathering part of the pipe-line system is the nuisance end of the business, I take it, from the statement of the pipe-line company-at least, they have always claimed that; and they would not come out here and install a gathering system until after they had received a certificate of convenience and necessity to build a trunk line or to extend a trunk line over to where any gathering system would have to be designated as beginning. So we would have to wait the same length of time, as far as being a producer is concerned, to get a gathering system, as we would if they included it. So, while it would not hurt us to eliminate it from the bill, certainly it would not help us. I should like, if I may, to clarify our relationship to it. We think of it as one system. Incidentally, the thing in which the producer is interested is the sale of his oil. This transportation is an incidental matter. Senator SCHWARTZ. The proper definition of a gathering line is a line that gathers the oil at a central point in the field and puts it into a pipe line that then goes out to the railrcads or to another pipe line? Mr. HUNTER. That is not my understanding. I do not know what might be defined as a gathering system; but I am saying to you that now in all the fields that I know anything about-and that covers a good many of them in the midcontinent area-the oil is taken from the producer's tank on his lease. Now, just exactly like if you get on a train, here: You might have gotten on a trunk line or a side line; that is true; and in going into St. Louis, somewhere along the way you might get on the main track. You might know when that was, but you might not. So far as the oil producer is concerned, he never knows the difference between the gathering line and the trunk line; because he makes his closed transaction when the pipe-line company turns the valve and lets the oil run out of the tank or furnishes the facilities to pump it out. Senator SCHWARTZ. I said at the start that that is the usual rule; but in several States with which I am familiar the oil is gathered in the field and part of it is purchased by the pipe-line company that transports it from the field perhaps 40 or 50 miles to a railroad or to another pipe line; but there are, in each of those fields that I have some knowledge about, producers in the field who do not sell their oil to anybody, but it goes out of that pipe line and finally comes to the point where they conduct small refineries. Mr. HUNTER. That probably happens. It may occasionally happen throughout the oil fields. I do not know at the moment of any instance in the Mid-Continent area. Senator JOHNSON (presiding). We are very glad to have that statement in the record. The next speaker is Mr. George C. Gibbons. STATEMENT OF GEORGE C. GIBBONS, EXECUTIVE VICE PRESIDENT, TEXAS MID-CONTINENT OIL AND GAS ASSOCIATION, DALLAS, TEX. Mr. GIBBONS. Mr. Chairman and gentlemen, my name is George C. Gibbons. I am executive vice president of the Texas Mid-Continent Oil and Gas Association, with headquarters at Dallas, Tex I appear officially representing that association and likewise representing the North Texas Oil and Gas Association, at Wichita Falls; the West Central Texas Oil and Gas Association, at Abilene, Tex.; the Permian Basin Association, Midland, Tex.; the East Texas Producers and Royalty Owners Association, Kilgore, Tex.; and the Panhandle Oil and Royalty Owners Association, Pampa, Tex. I have here letters from the officials of these associations: The West-Central Texas Oil and Gas Association, the North Texas Oil and Gas Association, and the Permian Basin Association, which are as follows [reading]: WEST-CENTRAL TEXAS OIL AND GAS ASSOCIATION, The CHAIRMAN, SENATE COMMITTEE ON INTERSTATE COMMERCE, Washington, D. C. DEAR SIR: This association is much concerned over the Senate bill introduced by Senator Johnson of Colorado, the effect of which, if we correctly interpret the text, would be to require pipe-line companies to obtain "certificates of necessity and convenience" before making connection to a new well or group of wells, or before making any addition or extension to their lines. In the opinion of our group, such a measure would create a hardship upon the independent oil operators of this region; and that the very definite results of the measure, if adopted, would be to curtail drilling activities, reduce gross revenues and reduce employment in independent oil field operations. In the interest of the independents of this region, who, incidentally, constitute the great bulk of the operators of this section, I respectivelly urge that this Senate bill be defeated. Very truly yours, JOE A. CLARKE, President. NORTH TEXAS OIL AND GAS ASSOCIATION, The CHAIRMAN, SENATE SUBCOMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. DEAR SIR: Senate bill No. 3753, by Senator Johnson of Colorado, which requires that certificate of convenience and necessity be obtained from Interstate Commerce Commission before pipe-line connections to oil-producing properties can be made, will do the geatest possible violence to the practical operation of oil production and transportation. Most oil fields are not in close proximity to other types of carriers, and pipe-line connections are essential even though the oil is later transferred to some other form of transportation. Transportation of oil by pipe line is the most practical and economic method yet devised. We urge that your committee not recommend that the Johnson bill or any other similar type of bill be passed. Yours very truly, NORTH TEXAS OIL & GAS ASSOCIATION, By D. G. GRAY, Executive Vice President. PERMIAN BASIN ASSOCIATION, The CHAIRMAN, SENATE SUBCOMMITTEE, INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. DEAR SIR: This is our authority for Mr. George Gibbons, executive vice president of the Texas Mid-Continent Oil and Gas Association, to speak for this association in protesting Senate bill 3753, by Johnson of Colorado. Mr. Gibbons knows well the sentiment of the oil people of this territory, and his views as presented to you may be taken as coming directly from officials of the Permian Basin Association, since se are not able to have one of our own representatives in Washington. We wholeheartedly believe that passage of this or similar legislation would be of lasting detriment to the oil industry. Sincerely yours, WILBURN PAGE, I have, also, Mr. Chairman, telegrams from the Panhandle Association and the East Texas Producers Association, and I should like to express their opposition to this bill. I might say, before I begin my statement, that the members of these latter associations I have mentioned are all independent producers of oil in Texas. The majority of the members of these local and district associations are likewise members of the association, the Texas Mid-Continent, whose statement I shall present. The Texas Mid-Continent Oil and Gas Association has in its membership producers of oil, royalty owners, farmers and landowners, and other allied businesses interested in oil production and its problems. in Texas. Its membership represents approximately 90 percent of the State's production. We appear in opposition to Senate bill 3753, which would require that a certificate of convenience and necessity be obtained from the Interstate Commerce Commission through certain defined procedures before future pipe-line connections could be made. Texas oil producers immediately recognize such a requirement as disastrous to future practical oil operations. Our State now produces approximately 40 percent of the daily oil requirements in America and a large majority of the daily production in the entire Mid-Continent area. Approximately 85 percent of our production is refined within the State and transported to consuming areas outside. To maintain this volume nearly a hundred thousand wells are in daily production. To serve these wells 35,000 miles of pipe line are required. These pipe lines form a virtual network of underground transportation, reaching oftentimes into almost inaccessible areas to carry the daily production of oil from such fields. This transportation system furnishes oil to 141 refineries in our State, which are enabled to regularly employ more than 30,000 skilled workmen because of the efficiency of our pipe-line facilities reaching from the wells to the processing plants. From an operating standpoint, the laying of pipe lines to provide well connections and a market for our oil is a routine field operation and is as vital and as much an immediate necessity as the well casing itself if production of oil is to be carried on safely and economically. Producers of oil in Texas find a free and highly competitive market afforded by the various pipe-line companies and the purchasers who use these facilities. There is a strong cooperative spirit between pipe-line operators and producers, and oftentimes connections are made largely on faith that the well or future field development will justify the connections. The nature of our business is such that immediate connections must be made in order to avoid waste, damage to surrounding properties, or pollution of water wells and streams. The majority of new fields in Texas are brought in by independent wildcatters and small producers, oftentimes spending their last dollar and credit to find such production. Our banks which finance these producers lend money on the expectation that no delays will be encountered in placing wells in production, and in finding a ready and immediate market for such oil in order that their loans may be paid. |