ward on the private holdings where they are on the outskirts of the high-grade oil reserve.

Senator HART. The competitive disadvantage that you suggest would be the addition of development costs done prior to the grant of the lease to the competitor? Is that what you mean?

Senator DOMINICK. No. The competitive disadvantage would be the fact that the holdings which most private individuals have are not of rich-grade oil shale. Consequently, a company which is getting a lease from the Federal Government later, should be in the middle, the heart of the vein, if you want to put it that way, in mineral technology, as opposed to being on the scattered outskirts of it.

Senator HART. A private holding over a rich part would not under those circumstances, be at a competitive disadvantage against the lessee of the Government

Senator DOMINICK. No, not nearly as much so, but as I say, most of these holdings are scattered. They are in strips. If you just take a look at what the full-scale industry is presumably doing in Russia, they are talking about-in my statement, a modern mine supposedly now under construction capable of processing 33,000 metric tons of shale per day.

Now, even at a lesser figure than that, I think you can see that the scope and scale of this is so broad that acreage sounds good and the number of tons of oil shale sounds good, but at that rate you eat it up awfully fast. Consequently, you have to have a rich vein which will be producing the oil to make it worthwhile because this becomes a wasting asset very rapidly.

Senator HART. Again, we are very grateful to you.

Senator DOMINICK. I thank the chairman and members of the committee. Thank you very much.

Senator HART. Our next witness is one of those hard-nosed economists, I guess, and a very distinguished American. I shan't burden the committee's time this morning to list his many accomplishments, but I shall ask permission that the record reflect them fully in the introduction of Professor Galbraith.

BIOGRAPHY OF JOHN KENNETH GALBRAITH

John Kenneth Galbraith has been a professor of economics at Harvard University since 1949. He has served in Government posts, written non-technical books for the lay public, helped to edit Fortune magazine, was a key figure in the presidental campaigns of Adlai E. Stevenson and an adviser to President John F. Kennedy.

His Government posts include that of economic adviser and assistant to Chester Davis, agricultural member of the National Defense Advisory Committee and director of price controls for the Office of Price Administration. When World Was II ended, he was appointed Director of the State Department's Office of Economic Security Policy which took charge of the economic affairs of Germany and Japan.

Some of his better known books include: “American Capitalism: The Concept of Countervailing Power" (Houghton Mifflin, 1951), "The Great Crash: 1929" (Honghton Mifflin, 1955) and "The Affluent Society" (Houghton Mifflin, 1958).

STATEMENT OF HON. JOHN KENNETH GALBRAITH, DEPARTMENT OF ECONOMICS, HARVARD UNIVERSITY

Professor GALBRAITH. Thank you very much, Mr. Chairman. My appearance here this morning is related to the fact that I served on

the Oil Shale Advisory Board during its deliberations which were completed a year ago last January, and

Senator HART. Professor, would you grant us a momentary recess

here.

(Short recess.)

Senator HART. Our apologies, Professor.

Professor GALBRAITH. I shall not detain the committee with any restatement of the report of that Board and my own particular views in conjunction with it because this is all a matter of record.

Senator HART. And we have introduced it in conjunction with my opening statement.

Professor GALBRAITH. With your permission I will introduce with some summary remarks and then be available for questioning by the committee.

Let me urge the committee first that farsighted efforts in the past have kept these lands as a great public resource. They have kept them out of the hands of those who under the general sanction of their devotion to private enterprise in fact, view public property as an opportunity for public spoliation. And we all have an enormous interest in continued restraint in our approach to this great resource. I would remind my distinguished Republican colleagues that this restraint is in the tradition of Presidents Harding, Coolidge, and Hoover to whom we owe originally the great protective steps which conserved these resources for the people of the United States.

Perhaps one of the tragedies of this resource is that the people are not better aware of its value of what they own. And here I would like to urge that this is a wealth that is owned by the people of the United States. It is a possession of all of us and there is certainly an egregious error in speaking of this as something that is monopolized by the U.S. Government. One does not have monopolies by the people of the United States in opposition to the public interest.

I would hope that one of the most important results of these and the other hearings would be that they will serve to extend the knowledge of this enormous wealth. We are a people with a vast treasure, unaware of its existence.

Let me address myself also to a point which played a very large part in the statements of the distinguished Senator from Colorado, Senator Dominick. It is true that some 80 to 85 percent of the shale measured in barrels of oil is in public lands. The rest is in private ownership. But so rich is this other 15 to 20 percent in aggregate that it amounts itself to an enormous wealth. Much of it is controlled by the large oil companies. Present known private oil company holdings in the oil shale territory in the three states, comes to 168,000 acres. This is a minimum figure. That 168,000 acres is estimated to contain 31 billion barrels or the equivalent of 10 years total consumption of petroleum by the United States.

Senator Dominick rightly said that some of this is low-yield shale but some of it is of the very highest quality, including ranchlands that became available in the center of the basin and which were prudently picked up as they became available for sale by the large oil companies.

I would like also to urge that while our high-quality oil has been produced in small quantity from oil shale, an economic process of recovery has yet to be perfected. While it seems likely that such a

method can be developed, the costs of such development are still unknown. Hence, the eventual cost of production of shale oil are unknown. It would seem probably, and I believe it is generally agreed, that the costs, even after the successful process is developed, will be above crude petroleum in the competitive area.

We must also remember that the rate of oil recovery from shale by prospective processes, these processes being unknown, is also unknown and the depth and quality of these rock strata in any particular area are known but only within very broad limits.

I would also like to stress that at the present time there is no showing of urgent economic or strategic need for oil from the shale as regards any foreseeable future period is concerned. The domestic petroleum industry is now operating as it has been operating for many years under severe limitations, and supplies coming from abroad are also subject to quotas. These sources we know to be cheaper. Hence, while whatever the case there may be for development, it does not depend on a pressing peacetime requirement for oil from shale. Given the most rapid development, oil from shale from total production will be negligible for many years and this means that in the event of some military contingency the oil from shale is not going to play any appreciable role.

We should remind ourselves that there is a strong pressure to develop an oil shale industry in the States involved for the beneficial effect on local incomes, employment, and property values. This is one of the factors on which those of us who, if Senator Hansen will permit me, do not have the good fortune to live in this admirable part of the country, can perhaps bring a somewhat larger perspective to bear.

The major oil companies are naturally concerned with protecting their position in the development of an oil shale industry. They are naturally interested as a result, in buying or controlling oil shale acreage. However, with one or two exceptions, they seem not now inclined to incur substantial development costs to produce shale oil. Certainly for companies with alternative sources of petroleum, the economic attraction of oil shale is not very high.

Incentive to control oil bearing acreage is thus, for the time being at least, much greater than the incentive to produce from it.

As with any public property of great value, in addition to this effort to protect the future, there is a natural desire to see it become available for private use and profit. And here is a point that I must emphasize and I hope the committee will have strongly in mind. Particular caution must be exercised because even a seemingly modest acreage contains many years supply of oil.

Let me illustrate this point. At the time the Oil Shale Advisory Board was established, there were pending in the Interior some requests for acreage, developmental acreage in this area. Superficially they looked quite modest. Shell Oil Co., for example, sought a matter of some 50.000 acres in the Piceance Basin. That 50.000 acres contained, when we came to examine the matter, an estimated 150 billion barrels of oil. This would suffice to cover all of the Shell Oil Co. requirements at the present rate of its refining for the next 660 years, not an inconsiderable period. It is the equivalent of roughly five times the total of all proved petroleum reserves in the United States.

There was pending a request from Sinclair, a much more modest request, that would have, however, lasted that company for 226 years,

assuming that it got all of its oil from this one source. There were very modest requirements of 5,000 acres from Humble and Continental5,000 acres I believe the Senators from that part of the world will be inclined to dismiss as a subsistence homestead. The Humble request would have taken care of all the requirements of that company for 54 years and the Continental request, all the requirements of that company for 27 years.

The Department of the Interior estimate indicates that some thousand acre tracts in the heart of the basin contain as much as 3 billion barrels of oil. That bears very importantly on the point that Senator Dominick made because some private oil companies already own tracts of those riches.

I think it well to notice in passing, although this is of only moral importance, that a substantial part of this reserve lies in a naval oil reserve in Colorado and a certain prudence and circumspection is especially suggested in view of the past experience with the naval oil reserves. I think it would be a great misfortune for all of us who are interested in this problem, were any action ever taken that evoked the memory of those historic naval oil reserves. I have reference, of course, to the Teapot Dome in Elk Hills.

These are certain things which seem important to keep in mind. Let me now suggest how this bears on the immediate matter under discussion.

First, while I don't suggest any more than any of the witnesses coming before this committee that it is wise policy now to begin locking up resources forever, the fact is that we have alternative fuel supplies wholly sufficient to allow orderly and equitable development of the shale oil resources. There is no occasion for extravagant or windfall profits as the price of hurried development. There need be no helterskelter alienation of this great public resource.

The long-term interest of the public in its common property should accordingly be fully protected. It is worth repeating again that one of the great hopes for protection is the widest possible public knowledge of this resource and the widest possible engagement of the interest of the people of the United States in this common wealth. And, while I don't want to seem to be in any way negligent of the interests of the people in this area, I want to stress with all the power at my command that it is the interest of all of the people of the United States, all of us, as the owners of this property that is paramount.

Let me also urge upon the committee that development is not now being restricted or curtailed by the fact that the larger part of the reserves are in public hands. When the Oil Shale Advisory Board first met at our first meeting-we were enormously impressed by the seeming fact that here this great reserve was being held out of use by the Federal Government. And I am forced to say to the committee that a considerable snow job was done on us in those first meetings as we heard how Federal ownership was holding up the development. I may say what has happened to us, is what will happen to this committee. As the evidence accumulated of the enormous wealth of holdings already in private hands, that argument disappeared. We began to hear that these very rich private holdings were a bit scattered, that they weren't close to service stations, hot dog stands, water supplies, and motels. They needed blocking up. But the suggestion that there

was not in private hands sufficient oil of sufficient richness of recovery has disappeared from our discussions.

Nor is the development being deterred by Government ownership and by the fear of the Government-by the fear of what the Government may do with its land. Development is being held up because of the costs of development, because of the economics of production. As compared to the alternative costs of crude oil from other sources-the economics of shale oil is either unclear or, if clear, it is unattractive. The charge that Government ownership is holding up the development is based either on ignorance of the size and richness of present private oil holdings, which I must say only in a certain charitable mood am I inclined to concede, or it is the result of an effort to turn local pressure for development into pressure on the Secretary of the Interior to lease the lands.

Now, let me say a word directly about Secretary Udall's program. I have only one item on which I would comment and that is item 3. The rest seems to me to be very orderly, very straightforward, very sensible procedure which I would endorse.

I have grave doubts-great objection in fact-about item 3 proposing R. & D., research and development, leases on the shale oil lands. This relates back to something I have just said. This proposal is to give leases of land, leases of this rich oil land, as a subsidy to engage in research to develop a process. The cost of developing this process we do not know, as I indicated. The cost of production from the process when it is developed is, of course, unknown. The recoverable value of the oil in the land that would be offered for lease is at best only imperfectly known.

Given these unknowns, the Government would be offering a subsidy of unknown value for a development of unknown costs promising a return of unknown amount. This amounts to disbursing public property while wearing a multiple series of blindfolds. I would suggest that it would be justified, if at all, only by the absence of alternative and more orderly procedures or by the need for great haste.

I have already indicated that there is no need for great haste and I would like now to suggest that there are alternative procedures which would be much more satisfactory.

I may say, incidentally, that this is not a view that is peculiar to myself, or to those of us who held this position on the Oil Shale Advisory Board. It was also a view strongly urged by some of the oil companies. Socony Mobile in its appearance 2 years ago before the Oil Shale Advisory Board urged this same point.

Incidentally, the proposal in point 3 of Secretary Udall's suggestion is not one for which there is any precedent. I am advised by the Department of the Interior that research and development leases for an undeveloped process have not, in fact, ever in the past been granted. What I would like to suggest as a much more straightforward and much more businesslike procedure is for the Department of the Interior under appropriate authorization simply to enter into contracts, perhaps as an extension of the present contracts, at the Anvil Point Plant, to develop one or more methods for mining both by conventional moons and in situ and extraction of the shale oil.

This would be with the understanding that such a process when developed would be in the public domain-would be subject perhaps