Report indicates that "nearly 40% of all wells (including development wells) now drilled in the United States are dry holes!" (Matter in parenthesis added).

The Chase Report states that, while in 1946 around 35 percent of fields discovered in the United States contained estimated reserves of one million barrels each, the frequency of discovery of such fields has declined rapidly so that the percentage of such fields found within our borders in 1953 was only about 16 percent of fields found in that year.

The conclusion is inescapable that the cost of finding and producing domestic oil, coupled with the decreased percentage of large discoveries, will compel further reliance upon oil imports.

C. Predicted future dependence of the United States on oil imports emphasizes the importance of adequate and available domestic supplies of oil.

That cheap, low-cost fuel in abundant supply is vital to our expanding economy is almost axiomatic. As pointed out by Eugene A. Burlingame of Arthur D. Little, Inc.: (14)

"We have just begun to recognize that resources of fossil fuels are exhaustible that the mineral products accumulated during thousands of years are consumed annually-that the world will very shortly enter a period of fuel scarcity if no new fuels are made available. These conditions apply with more force to other parts of the world than the United States. However, even in our country supplementary sources of energy are necessary if our economy is to continue to enjoy the stimulating influence of low-cost power. By 1970, our reserves of petroleum, natural gas, and coal will be inadequate to support our expanding energy requirements."

As succinctly stated by Major General A. E. Cottula, U. S. Air Force, "Our ability to exploit properly our abundant sources of energy, particularly the fossil fuels, has been the very key to the advancement of our civilization and the attainment of our present high standard of living."(15) The General aptly illustrated his point by the following example:

"... Just the other day, out in Ohio, a large manufacturer of excavating machinery unveiled a giant earth-mover that will move as much dirt in three hours as a man with a shovel could move in his entire life. During these three hours the machine

PERCENT

consumes the energy equivalent of $7.50 in diesel fuel. For $7.50 it is now possible to buy a whole lifetime of drudgery and toiland get it in less than half a working day.

"This is progress! Progress made possible by putting oil to work to multiply our strength. Progress that benefits every man and woman in our United States. Progress of a type which raised 13 small colonies to a position of world leadership. Progress because a source of energy was available in abundance and at an extremely low cost..."

The following chart from the Bureau of Mines' Annual Report for 1956 shows the increased prominence of oil and gas as fuel in the United States:

Today around two-thirds of all fuel energy used in the United States comes from oil and gas. The number of man years of work these trillions of B.T.U.s accomplish is beyond estimation. It can hardly be denied that continuing to make available adequate supplies of fuel is a matter of paramount concern in promoting the welfare of the people of America.

II.

AN INCREASE IN AVAILABLE OIL WITHIN THE CONTINENTAL LIMITS OF AMERICA IS A VITAL NECESSITY IN ORDER TO MAINTAIN FREEDOM FROM ECONOMIC COERCION IN TIME OF PEACE AND TO AVOID DEFEAT IN TIME OF WAR.

A. The problem of availability of oil is a world problem.

The vast expansion in the use of oil and gas is not limited to the United States. In fact, expansion in use in the rest of the free world since World War II is fantastic. According to the Chase Report demand in the free foreign world for petroleum has been increasing at the rate of 11 percent compounded annually and by 1965 will exceed the 1955 demand by 103.4 percent. Where is the Free World to obtain the necessary oil? The foreign countries which will have the highest increase in demand are the countries with the least present or potential production.

In 1955 Free Europe imported from the Middle East 86 percent of all crude oil it consumed. About 63 percent came by tanker via the Suez Canal, the other 37 percent arriving by pipeline to Eastern Mediterranean ports, thence by tanker.(16)

The Chase Report indicates that by 1965 the estimated production in the Eastern Hemisphere will be about double production in the Western Hemisphere, excluding the United States. The Eastern Hemisphere production will come principally from the Middle East area.

Recent history has illustrated the difficulties involved in this situation, and no attempt to review in detail the history of the discovery of oil and production arrangements with the potentates of the Middle East will be here attempted. We will confine our observations to the nationalization of the oil industry in Iran which caused the shut-down of the entire industry for three years, the 50-50 profit splitting requirement common in this area, the fact that each country is continually making new demands for additional compensation, direct and indirect, the political instability of various governments in the area, and last but not least, the vicious instability evidenced by the Suez incident. All of these indicate the hazards of dependence upon this source of supply.

Staples (9) argues effectively that the United States must, because of increasing costs and relatively low reserves compared to Middle

East reserves, continue to increase imports of oil. This may be true, but we must also constantly keep in mind the political and economic factors which may suddenly deprive us of access to these reserves. Since oil consumers are effectively placed at the mercy of the local politics and the local tantrums of the area, Middle East reserves of oil are not dependable. (17)

B. The interests of national security demand that adequate oil reserves be developed within the United States.

What would happen in the event of World War III? What would happen in the event of a "police action" in the Middle East?

It is quite readily apparent that United States' capability to import oil, to say nothing of its ability to protect the lines of supply for the rest of the free world, would be extremely limited. Military experts on logistics have repeatedly testified before Congressional committees that oil from the eastern hemisphere and even from the western hemisphere might not be available in time of war.(18)

Captain S. A. Miller, U. S. Navy, Director of Naval Petroleum and Oil Shale Reserves, testified that:

We would not be concerned if we could rely on a long period of peaceful existence, but the military cannot do that it might be national suicide. The present situation in the Middle East shows how little reliance can be placed on oil from that source . . . Also, I have been informed that the American Petroleum Institute has indicated that JP-4 jet fuel could not be supplied to the military in the amounts that would be required in the case of a large scale war from our domestic petroleum sources .."(19)

The Hon. Joseph O'Mahoney has testified that " 114 United States flag tankers were sunk by the German submarines right off our coast. We know now that Soviet Russia has a far greater submarine fleet than that which was possessed by Hitler . . . "(20)

Captain Miller further observed that ". . . if we become more and more dependent on foreign oil as time goes on, the military will be in a bad way for its needed supplies if and when the next war emergency occurs "(21)

It has been argued that there exists in the United States as shut-in reserves a capacity to deliver from domestic wells an additional two million barrels per day and, therefore, that the present importation

of 1.5 million barrels per day does not pose a serious threat in time of emergency. This theory has been exploded by no less an authority than A. L. Nickerson, President of Socony-Mobil Oil Co., Inc. (a company which is a large domestic producer and also a larger importer of oil) who shows how misleading this argument is. Mr. Nickerson cites experiences of World War II and states that "The strong probability is that we would not be able to produce more than eight percent of our total proved reserves each year on a sustained basis." (Emphasis supplied.) He concludes that such additional production probably could not be sustained longer than a few months and that a figure of 600 thousand barrels per day Maximum Efficient Rate of production represents our domestic reserve shut-in capacity. (22) This conclusion is adopted by the Chase Report.

As stated by J. H. Carmichael of the New York Times "The side which has the greatest availability of oil is the side which will win the next war." (23) We must do everything humanly possible to promote a growing domestic supply of oil to offset, if not overcome, our dependence on supplies produced beyond our continental limits.

C. Encouraging adequate domestic reserves of oil would benefit the entire oil industry.

By reducing the domestic shortage of oil, a domestic synthetic fuel industry would also reduce the plausibility of arguments for federal price controls based upon alleged price increases to take advanage of world crises. Such action has recently been threatened in Congress. (24)

According to Captain Miller synthetic fuels, especially fuels from oil-shale, are particularly adaptable to the production of jet fuels, diesel oil, and naval fuels, and further, the demand for these fuels causes the accumulation of excessive stocks of gasoline when oil from wells is used for diesel oil production. Captain Miller shows how oil from this source" . . . will supplement, not compete, with our petroleum industry which must continue to be geared to the vast civilian demand for gasoline." He further states "that shale oil, therefore, appears to be an excellent source of the very fuels we would expect to be in shortest supply in an emergency."(25)