dom of the free world depends upon our capacity to provide an everincreasing supply of petroleum energy.

Today we are consuming four times as much petroleum as we consumed in 1926, when Congress acted with such inspired wisdom. But today we are 30 years closer to the period of diminishing returns from our oil and gas wells. Must we wait until there is a devastating short supply before we act?

There are rumblings in some congressional areas advocating the reduction of the depletion allowance on oil and gas wells. That is bad news for consumers.

A more unfortunate time for such a backward step could not be chosen. The percentage of "dusters" being drilled is going up, up, up, and the depth of producers is going down, down, down, year after

year.

If ever an adequate depletion allowance as a production incentive were needed to bolster the supply of petroleum, it is right now.

Here is something the opponents of a realistic depletion allowance should ponder. I am not paying as high a price for my gasoline today as I paid in 1926, when I lived in the shadow of a refinery. At that time State and Federal taxes on my gasoline was 5 percent; now it is 25 percent.

During my 18 years on the Senate Finance Committee, I supported petroleum production depletion for no other reason than to protect gasoline consumers against a short supply and a higher price.

It is my considered judgment that, without such a realistic production tax incentive, the price of gasoline would be 50 percent higher to the consuming public and production of domestic oil would be at an alarmingly low level right now.

The production tax incentive has enabled the petroleum industry to absorb the devastating onslaught of inflation which has raised particular havoc with the price of all other commodities since 1926.

Today the United States imports approximately 12 million barrels of petroleum and petroleum products per day to meet her consumptive demands. As our uses soar imports must soar also.

New domestic wells cannot come in fast enough. In time of war or international emergency these foreign supplies would be transported by necessity through areas within the sovereignty of foreign nations and on the open seas, and, therefore, subject to hostile action which could halt them entirely, leaving us in short supply in the hour of our greatest need.

May God grant that war does not come, but should it come, the nations having the greatest ready supply of petroleum will have a distinct advantage. In that field of life and death struggle, we dare not be in second place.

Fortunately for all of us, the United States has huge deposits of oil shale and fantastically large reserves of coal, which can be converted to liquid fuel if Congress provides the necessary processing methods with equitable tax treatment.

These oil shale deposits occur in more than half of the States and these coal reserves in 31 States.

The Nation's coal reserves as reported by the Department of the Interior, USGS Circular No. 293-revised for 1956-are 1,845 billion tons, most of it on public lands.

The United States Geological Survey reports that oil shale has been found in Alaska and at least in half of the States. The two deposits of greatest significance are the rich and thick oil shales of the Rocky Mountain region, known as the Green River formation and the black shales occurring in several Eastern States, known as the Chattanooga formation.

The Green River formation covers an area of approximately 16,500 square miles including 2,600 square miles in Colorado, 4,700 in Utah, and 9,200 in Wyoming, with much of it on public lands.

A very recent survey of the USGS indicates that in Colorado alone, after eliminating all shales running less than 15 gallons of crude oil to the ton, there are at least 1 trillion barrels of oil locked up in these shales.

The Utah and Wyoming oil shale beds have not been core drilled but the USGS estimate is that Wyoming has at least 5 billion barrels, and Utah at least 50 billion barrels of recoverable liquid fuel.

The Mohogeny ledge in Colorado runs from 30 to 45 gallons of liquid fuel to the ton and would require 80 years to extract its oil at the rate of 2 million barrels a day.

The United States Geological Survey's latest statistics on the coal reserves of Wyoming, Colorado, and Utah, show Wyoming's coal reserves to be 120,766 million tons; Colorado's, 99,420 million; and Utah's, 92,868 million tons.

As I have said, most of these reserves are on public lands.

The Synthetic Liquid Fuel Act passed by Congress in 1944, directed the Bureau of Mines to conduct research and development work on methods of producing commercial oil products from oil shale and coal. As a result, the Bureau conducted an extensive research program in the field of producing synthetic oil from shale and coal with very satisfactory results.

In their experiment at Rifle, Colo., Congress spent $17 million developing a practical method of extracting liquid fuel from oil shale. It was the expressed hope of Congress at that time, and I think since, that this initial expenditure would encourage private capital and private industry to carry the experiment through to the development stage.

As anticipated the research directed by Congress has had that desired result.

Union Oil of California has built a pilot plant in their California laboratory and another in the oil shale mountains near Grand Valley, Colo., at a total expenditure of almost $8 million, with a rated capacity of about 300 barrels of liquid fuel per day.

The Denver Research Institute is conducting tests of a Swedish designed retort for the Shale Oil Corp. Other oil companies are carrying on active testing work.

This pilot plant at Grand Valley has proved the commercial practicability of this oil source; however, it has also reconfirmed the serious investment road blocks facing the unborn oil shale industry.

To raise the immense capital from private sources, required to finance such an industry, presents the greatest difficult. There just isn't a Chinaman's chance to interest investor capital in liquid fuels, unless and until Congress accords equitable tax treatment in this competitive field to this prospective industry.

Today the Treasury does not receive one penny from the synthetic liquid fuel industry since there is no such industry.

If Congress exercises the same constructive judgment it used in 1926, towards this potential industry, there will be such an industry and the Treasury will have a whole flock of additional heavy contributing taxpayers.

A fully equipped oil shale plant, including refining facilities which could convert raw shale oil to a product equal to high-grade crude oil would cost about $7,800 for each barrel of daily capacity. Thus a 20,000-barrel-a-day plant would cost about $156 million; a 100,000barrel-a-day plant in excess of $700 million, and so on.

In addition, a pipeline to the Pacific Coast would cost between $50 and $100 million.

On this basis of calculation, it would require a capital investment of $7 billion to build an oil shale industry with a production capacity of 1 million barrels of liquid fuel a day.

Oil shale and coal were not deemed to be a part of our oil supply when the depletion tax rates were granted by Congress in 1926 to oil and gas well production. Today it is a far different story and the need for additional supplies of crude oil is very great.

Most respectfully, therefore, we urge this very able committee to give the industries processing oil shale, coal, and other natural hydrocarbon deposits for the extraction of synthetic oil and gas, the identical tax treatment now available to oil- and gas-well production.

Unless and until Congress acts to make it equally attractive for private capital to invest in synthetic fuels to that now accorded investors in oil and gas wells, there can be no progress made in the domestic synthetic fuel industry.

The CHAIRMAN. Thank you, Senator.

Mr. KITCHEN. Fred Hartley.

STATEMENT OF FRED L. HARTLEY, VICE PRESIDENT FOR RESEARCH, UNION OIL COMPANY OF CALIFORNIA

Mr. HARTLEY. My name is Fred Hartley, vice president for research for Union Oil Company, of California.

Our address is 617 West Seventh Street, Los Angeles.

I would like to summarize my written statement and desire that my full statement be included in the record.

The CHAIRMAN. Without objection your full statement will be included in the record.

Mr. HARTLEY. Thank you, Mr. Chairman. (The statement referred to is as follows:)

STATEMENT OF FRED L. HARTLEY, VICE PRESIDENT FOR RESEARCH, UNION OIL COMPANY OF CALIFORNIA, BEFORE WAYS AND MEANS COMMITTEE OF THE HOUSE OF REPRESENTATIVES, UNITED STATES CONGRESS, RE SYNTHETIC FUELS DEPLETION ALLOWANCE

An ancient saying refers, somewhat sarcastically, to the unlikely task of "getting blood from a stone," which parallels our task of getting oil from oil shale rock. We are attempting to do this, and do it in a competitive commercial manner. Oil shale rock looks like this:

and the blood-the key energy source of our American economy-is oil. Raw shale oil is similar to petroleum-derived crude oil; but, as shown in figure 2, it is less fluid at room temperatures.

The purpose of this discussion is to describe the origin of oil shale, the location of significant deposits, and the procedures which have been developed for mining this raw material and extracting therefrom a petroleum hydrocarbon product.1

The most significant known United States deposit is the Green River formation. This formation occurs throughout an area of approximately 16,500 square miles, including 2,600 in Colorado, 4,700 in Utah, and 9,200 in Wyoming (fig. 3). That portion of the Green River formation occurring in Colorado's Piceance Creek Basin, and specifically the rich substrata known as the mahogany Ledge, is currently of greatest economic interest.

Total potential oil content (without making allowances for losses that would be incurred in the mining and treatment of oil shale) of the Green River formation has recently been estimated, by the United States Geoligical Survey, to be in excess of 1.5 trillion barrels. This can be compared to recent estimates of United States proven conventional petroleum reserves of something less than

FIGURE 3.-Map of Rocky Mountain States showing Piceance Creek oil shale basin.

33 billion barrels and total free-world proven reserves of approximately 207 billion barrels.

Abut one-half of the Mahogany Ledge area is United States Government property, of which 10 percent is set aside as a petroleum reserve for the Navy. Union Oil Co. of California entered the shale picture early in 1920 and we now have approximately 10 percent of what is available to industry. It should also be noted that reasonably good deposits of oil shale are found to exist in the Chattanooga formation of Indiana, Ohio, Kentucky, Tennessee, and neighboring States.

The Bureau of Mines has defined oil shale as a laminated, sedimentary rockthat is, a rock formed by successive deposits of plant and animal life mixed with clay and sand. The rock, therefore, contains organic material (usually called "kerogen") from which oil is released by the application of sufficient heat to cause its thermal decomposition. The shale oil, then, is extracted as is mercury from cinnabar ore.

Until the beginning of this year we have derived ore for the operation of our shale demonstration plant at Rifle, Colo., by the use of strip-mining (figs. 4, 5, and 6).

1 Appendix A is included to provide a frame of reference of commonly accepted definitions of many of the terms found in this presentation.