and therefore will not be developed by the Farmers Union. However, we do hold a one percent royalty agreement on this Utah land.

We do not feel that the 271⁄2 percent depletion allowance should be applied to shale oil development. The justification for the enactment of the 271⁄2 percent depletion allowance provision in our tax laws was that it would encourage de velopment on lands where any investment would be highly speculative. It was enacted principally to induce so-called "wild-cat" development of unknown and unproved fields. However, this situation does not apply to shale oil minerals. The location and extent of shale oil is well-known and therefore any investment in development would be attended with a minimum of risk.

20 largest oil companies Federal tax, 1962-65-Continued

Marathon is the only large oil company that has been able to conceal its domestic income taxes in the Securities and Exchange Commission files. We phoned Girard Jetton, Marathon's tax chief and asked the U.S. figures, but he said it's a secret. Since the firm probably doesn't want to keep secret the smallness of its foreign taxes, it's assumed the U.S. tax is small and all of Marathon's income taxes are listed as foreign.

Senator HART. Second, your informal comments were impressive and helpful. You have lectured us on some aspects of this problem and related problems that are not our jurisdiction, but you have taken advantage of the opportunity to spread the gospel that normally would be restricted to some other committee or committees.

I was interested in your explanation of the sale by the Farmers Union of the shale interests in-was it Utah?

Mr. McDONALD. Yes, sir.

Senator HART. With a one-percent royalty reserved.

If the technology had advanced to the point of giving assurances to the methods by which the oil could be extracted from the shale,

would it be likely that the Farmers Union would have held the land and itself have undertaken development and production?

Mr. McDONALD. Well, Mr. Chairman, that would be entirely speculation on my part to answer that question. I can give as an example the development in Utah which, as I believe, the Farmers Union, not a rich organization, obtained $10 million from an oil company that entered into a partnership.

Now, this proposition here in regard to oil shale, I understand, is a $100 million, but I would hope that if we are not in too big a hurry about developing these resources, that the Farmers Union and perhaps other groups, cooperatives-the Farmers Union has the largest cooperative in the world in St. Paul. We market more grain than any cooperative in the world, the Farmers Union Grain Terminal Association.

Unfortunately, we get very little money financially from this great organization.

But, anyway, there is a great body of cooperatives in the country, and cooperatives, as I have just illustrated, frequently enter into partnership with private corporations, profit corporations so-called, and it might well be, Mr. Chairman, that the Farmers Union, if it had held on to those lands, might down the road sometime develop them.

Senator HART. You either did or are doing this in potash?

Mr. McDONALD. Yes, sir.

Senator HART. Mr. Chumbris?

Mr. CHUMBRIS. Your organization, in making the decision to join with Kerr-McGee, was it a partnership arrangement with KerrMcGee?

Mr. McDONALD. I do not work on that side of our street.
I think it was a 50-50 partnership.

Mr. CHUMBRIS. Yes. But your organization's managerial decision there was that it was wise to go in 50-50 with Kerr-McGee on potash. Again your managerial decision or the administrative decision on your shale oil was such that at that time it did not appear to be as economically feasible to go into oil shale as it did into potash, so you decided to sell. I would assume you decided to sell whatever interests and then maintain a one-percent royalty as part of your contractual arrangements.

Mr. McDONALD. Yes, sir.

Mr. CHUMBRIS. And it was a decision you made. Maybe if you had to do it again today maybe you would decide to go into oil shale, is that not so?

Mr. McDONALD. Possibly, but we might have-of course farmers like to make money the same as anyone else, particularly if they do not have much of it. It might be that we would get much more instead of getting, say, $200,000 or $300,000 or whatever it was, I do not know.

We might be able to sell-they tossed around millions here in this hearing. We might get several millions instead of $200,000, or we might go into

Mr. CHUMBRIS. Could you put a time as to when that contract to dispose of your oil shale interests. When was that, 10 years ago or what?

Mr. McDONALD. I am sorry, I did call our general counsel in Denver yesterday, and he explained this. I did not know as much about it or anything, and I did not think to ask him what time this transaction took place. But I think it was several years ago. I do not think it would have been done if we had waited, say, until last year.

Mr. CHUMBRIS. Yes.

Do you recall how much of an interest you had in oil shale in Utah? Mr. McDONALD. Well, Mr. Brannan read off several sections. We had acreages. I think it was considerable, but I could not answer your question, I am afraid, on that point.

Mr. CHUMBRIS. But the point is that the Farmers Union decided when they did, your not knowing the exact year, they decided that the best thing to do was to dispose of it, and disposed of it rather than holding on to it and invest in it instead of potash which seemed to be a more favorable operation to you.

Mr. McDONALD. Yes, sir.

Mr. CHUMBRIS. That is all.

Senator HART. Thank you very much.

Mr. McDONALD. Thank you, Mr. Chairman.

Senator HART. We adjourn, Mr. McDonald being our concluding witness today, until Tuesday next at 10 to meet in room 1114 of the New Senate Office Building.

(Whereupon, at 1 p.m., the committee recessed, to reconvene at 10 a.m., Tuesday, April 25, 1967.)