their own profit will make agreements that will suit them best without your representative in Congress having anything to say

about it?

It is left to a committee on conservation. The members of Congress and the members of the Senate are the only ones that are answerable to you directly. I do not want to be unjust, but I for one do not want to vote for this bill.

Mr. Newlin:

Mr. Chairman, I think there is on the part of the last speaker an apparent misconception of the purpose of the bill. The purpose of the bill is to conserve and not to waste. Under the existing law, in view of the provisions of the Sherman Anti-Trust Act, it is extremely doubtful whether or not where four or five or perhaps only two companies own an entire oil structure and oil pool, that they can enter into an agreement to constructively and efficiently and economically develop that pool.

Under the existing situation throughout the United States, the discoverer, for instance, of a pool puts down a well; the owner of the other interest in the pool puts down a well; and the discoverer another well, the oil during that time being over produced. It is to avoid the situation that was pointed out by Dr. George Smith the other day before the Mineral Section. He stated that in 1927 there were 7,000,000 more barrels of oil shipped from the United States than there were in 1926 at a loss of $69,000,000.00 over what was received in the previous year. That is the sole purpose of the bill. It is to conserve under agreement and not make applicable to that situation the present provisions of the Sherman Anti-Trust Act. Should the gentleman desire further enlightenment upon the necessity of the situation, I would respectfully refer him to the address which is printed that was delivered by Dr. Smith, the head of the United States Geological Survey, and also that delivered by Honorable Cornelius F. Kelly with regard to the necessity of protecting these vital resources.

Julius Henry Cohen, of New York:

Like the gentleman from Boston, I read this bill while the presentation of the report was made. I find that the bill is in

tended, as the Chairman presents it, to permit the making of cooperative agreements for the prevention of waste in the development of oil or petroleum. The supervision in the public interest, the power to supervise and approve is vested in the Federal Oil Conservation Board, which consists of the Secretary of the Interior, Secretary of War, Secretary of the Navy, and Secretary of Commerce. The cooperative agreement must be registered with the conservation board and the agreement must comply with the following conditions-among which is the condition that it is subject to disapproval by said Board at any time on the ground that it is not in the public interest.

My difficulty in fully concurring with the committee report arises from the language of Section 2, to which I direct your attention on page 35 of the Advance Program, and I respectfully commend to the experts who drafted the bill the consideration of an amendment of that Section so as to clarify it and remove the difficulty of which I am speaking. Section 2 reads:

No agreement by two or more persons for the cooperative development and operation of an oil and gas pool shall be deemed in violation of any of the acts of Congress forbidding monopolies or agreements in restraint of interstate commerce.

That provision might be construed by the United States Supreme Court to apply to an agreement which would otherwise be in violation of the Anti-Trust Laws. It seems to me, therefore, that Section 2 should be revised so as to make it possible for those who desire legitimately to cooperate in the prevention of waste to agree upon those things which would be in the public interest, and preclude the Court from declaring such an agreement a violation of the law.

My suggestion would be that there be added words like this:

No agreement, otherwise legally valid, by two or more persons shall be deemed in violation of the anti-trust laws.

In other words, the language of Section 2 is in my humble judgment much too broad to protect the public interest and is likely to cause very serious embarrassment in the future when a suit comes before the United States Supreme Court involving construction of the statute. I am in favor of the policy of the bill, and I think the gentleman from Boston would make his

point more effective if he recognized the fact that the bill is intended to safeguard the public interest.

Mr. Borofsky:

What reason is there for selecting the oil interests as against any other in making them immune from the United States laws?

Mr. Cohen:

My answer cannot be the answer that the Section would give you, but my answer from what I have read of the report is that there appears to be at the present time a great deal of waste and a great deal of misuse of the oil resources of the country, and that it is economically desirable that the oil companies combine for the prevention of such waste. On the other hand there is great danger of conflicting with the Anti-Trust Law.

Nathan William MacChesney, of Illinois:

I want to direct an inquiry to the Chairman. In general it seems to me that this legislation is needed, but it seems that Section 2 as Mr. Cohen has said, is so broad as to raise a question as to whether it is subject to the limitation of Section 3, and I want to direct an inquiry to Mr. Newlin with reference to the right of the Board to disapprove when it is not in the public interest, whether in his judgment, in view of the title of the Act, it could disapprove in the public interest on the ground, for instance, that it was raising the price to the public, or whether that public interest would be limited to conservation in view of the title?

Mr. Newlin:

I believe I can attempt to answer the question of the gentleman from Illinois. The bill as drafted is intended to cover two situations; one, an agreement with regard to the operation and development of a pool limited to one pool, which is covered by Section 2; and second, an agreement with regard to operations, it may be of many pools, when you have a period of over production-when you have a situation as it exists today where oil is being produced at a net loss because the price of oil is less than the cost of production in many sections of the United States. That agreement must, before it can be operative, be submitted to and

approved by the Federal Oil Conservation Board, so that if that Board should conclude that the price is not economically wrong, and there is not being as a net result an actual waste that the agreement may be held to be inoperative and invalid.

Mr. MacChesney:

Is it your construction that Section 2 is limited to a single pool?

Mr. Newlin:

That is without any question.

Mr. MacChesney:

Could the same two persons make several agreements with reference to several different pools?

Mr. Newlin:

They could not. No.

Mr. MacChesney:

Why?

Mr. Newlin:

It says of an oil and gas pool.

Mr. MacChesney:

Could not a separate agreement be made between the same two companies for the second or third?

Mr. Newlin:

Not under Section 2.

Mr. MacChesney:

There is some doubt under that language. It is true it says 66 No agreement by two or more persons . . . . shall be deemed a violation." That single agreement could cover two or more persons and a single pool only, but there is nothing to prevent a series of agreements which refer to separate pools.

James A. Veasey, of Oklahoma:

The work which this committee undertook, and which is before you for consideration was instituted by the Government of the United States. It was the predicament of this basic industry which induced the Secretary of the Interior to try to bring about the appointment of a committee of nine representing the American Bar Association, American Petroleum Industry and the United States Government. The three representatives of the government who sat with us in our deliberations were the Assistant Secretary of Commerce, Assistant Secretary of the Interior, and a member of the Federal Trade Commission, each of these officials having intimate contact with the subject and each of them an able member of our profession.

When the question of the form of this bill was before us for consideration there were two situations that were perfectly plain, and those I would like to outline for your consideration before you vote one way or the other on the resolution now before you. The first deals with single oil pools, and permits the conservation of the oil in that pool by the operators interested therein. Those of us who have had special experience with this business know that every single oil pool taken in its collective sense represents a number of individuals. Now the question which the committee considered was whether or not agreements limited to a single pool were to be subject to supervision just as well as the others that were not. There were two or three considerations which forced us to a conclusion in that regard. The first was that agreements of operators limited to a single pool were probably local in their significance rather than national, for the reason there was no encroachment of the Federal Law. The second was that these detached agreements made here and there and the other place by different individuals, or which would be so named in the great question of over production, though they may be made as a matter of conservation would not be in violation of the Federal Anti-Trust Act, but it was to relieve the fear of the industry in that regard that we took the precaution which we did by saying that operators in a single pool might enter into these agreements.

Now about the second and broader phase of the picture, it follows as a matter of common sense that you cannot use govern