chase were established. These acts, along with many others, and, of course, the Homestead Act,' the Desert Lands Act,2 and similar legislation promoting the appropriation of land for agricultural and forest purposes made possible the rapid development of the American West. There are, however, important corollaries and restrictions on the principle of private property in relation to the natural heritage doctrine. These restrictions arise out of the basic concept of the natural heritage that the land belongs to all of the people. One major limitation on private property which is imposed by the natural heritage doctrine is one which has historically received great attention in the United States. This is the requirement of stewardship. Although the individual may own the land or forest or stream or mine, his life is finite and his interests transitory. The rights and interest of the people by contrast are perpetual, stretching from generation to generation. Hence, the natural heritage doctrine places a strong emphasis upon conservation.

I have quotations here that buttress that, but I leave them out in the interest of time.

Ultimately, however, the conservation movement received statutory and constitutional sanction as an invaluable limitation upon unbridled private property rights. American jurisprudence accepts the rule that

the public at large has an interest in the preservation of the natural resources of the country sufficient to justify appropriate legislation to prevent exploitation or waste of such resources by the owners of the land on which they are found." The second limitation on private property which arises from the natural heritage doctrine is more important for our purposes today. Under a competitive system various private owners compete with each other to sell the fruits of the land to all who will buy, thus providing equal enjoyment for all the people of the natural resources of their country at fair and reasonable prices. The natural heritage doctrine expressly depends upon the regulating power of competition as a means for distributing the benefits of natural resources and expressly excludes the exploitation of a natural resource for the benefit of a private individual or corporation and to the detriment of the people. Monopoly practices and monopoly profits are incompatible with the natural heritage doctrine and equally incompatible with the statutes regulating the public domain. The small acreage limitations 5 in all of the land legislation, and the very purposes for which the legislation was enacted clearly indicate that the prospect of land monopoly was abhorrent to Congress.

6

Thus, the natural heritage doctrine was an article of faith for the conservationists. Among those who spoke eloquently about it were:

112 Stat. 392 (1862).

219 Stat. 377 (1877).

311 American Jurisprudence 1034.

4 Noyes, "The Institute of Property," p. 292. Theodore Roosevelt once stated that: "If we allow great industrial organizations to exercise unregulated control of the means of production and the necessities of life, we deprive the Americans of today and of the future of industrial liberty, a right no less precious and vital than political freedom. We should do all in our power to develop and protect individual liberty, individual initiative, but subject always to the need of preserving and promoting the general good No man and no set of men should be allowed to play the game of competition with loaded dice."-Address to the National Conservation Commission, 1909.

5 Normally 160 to 640 acres.

Settlement, and revenue were the prime objectives. See Congressional Globe, 42d Cong., second sess., 534 (1872).

4

5

Gifford Pinchot, Overton W. Price, the Secretary of the Forests Section of the National Conservation Commission, George W. Woodruff, the Secretary of the Lands Section, the late George E. Chamberlain, Governor of Oregon, Thomas F. Walsh, President of the TransMississippi Commercial Congress, Charles Van Hise, noted scholar and president of Wisconsin University, and Charles Perkins Marsh, famous author and chronicler of conservation. This list is by no means exhaustive, and the ideas expounded by these men were not always clear cut and precise. They represent synthesis more than originality-and the synthesis of thought which these men defined as the natural heritage doctrine might be more aptly termed "the American. doctrine." Its vital strength and truth, though violated in the past, is strong today and should guide our efforts toward achieving a rational oil shale policy.

The natural heritage doctrine, while emphasized by conservationists, also has formed a part of the thinking of economists. Of course, economics today is so highly technical and quantitative that most economists are too busy with their tools of decisionmaking and management to think or write much about the basic philosophy which underlies the discipline. Therefore, I shall appeal at first not to a modern economist but to one of the great American economists of the past generation. This is Henry Carter Adams (1851-1921), for many years a professor of economics at the University of Michigan, I assure you, Senator Hart, that this is a pure coincidence

Senator HART. I read this last night and reread it. Thank you. Professor GARNSEY (continuing). President of the American Economic Association of 1896, and described by Professor Joseph Dorfmann of Columbia as "the harmonizer of liberty and reform." By this, Dorfmann means that Adams, while a believer in laissez-faire and the efficacy of the competitive market, was troubled by the evidences of the failures of competition and the market, and by the evidences of the growth of monopoly. He addressed himself specifically to this problem as it relates to minerals in one of his major works, The Science of Finance, published in 1898. This quotation is so important that I must read it:

The general argument favoring the public ownership of mines is that minerals are the free gift of nature, and should, therefore, not be made the property of any individual. Even in countries where the surface lands are assigned to individuals for private cultivation, it has been proposed to reserve the mineral deposits for the State. This suggestion is found in the land policy proposed by Turgot, the great Physiocrat statesman of France. The policy which has come to prevail in the United States, however, and indeed in most countries, is to give title, in case of sale, from the surface to the centre of the earth. The argument which has led to the assignment of mineral lands as private property does not disregard the fact that minerals are a gratuitous gift of nature, but asserts, as breaking the force of this consideration, that nature has been so bounteous in her gifts that no injury can arise to consumers as the result of such assignment. Consider, for example, the wide extent of the coal-fields in the United States, as also the great number of iron-mines and salt-wells that abound. There is nothing in the nature of the case why competition should not deter

Van Hise, "The Conservation of Natural Resources in the United States," 1 (1910). The doctrine is even traceable to Rousseau, who, in the Social Contract, argued that man's rights to land extend only to those necessary for his subsistence.

mine the price of these products, and, in the absence of artificial restraints, the public finds, in the many opportunities for mining, a guarantee that mineral products of this class can be had at cost. There is, therefore, no more necessity from the ethical or commercial point of view for the government to own and administer such mineral property than for it to take into its possession any other industrial enterprise * * *.

But this line of reasoning does not apply to minerals which are localized to such an extent that they may be accounted a natural monopoly, as for example the zinc mines in the United States * * *. A detailed study of the mining conditions of any country shows many exceptions to the assumptions of the argument for private ownership presented above * *

It must not be overlooked that it is an injustice to the community as well as a source of a social danger to assign rich mineral deposits to individuals or to corporations. Mineral wealth is the gratuitous gift of nature, and it would be a mistake for any government to ignore this fact.1

These words are alive, and relevant today. Indeed, the natural heritage doctrine is alive and relevant as it always will be and always must be. For example, as recently as January 30th, President Johnson in addressing a message to the Congress on air pollution referred specifically at the end of his message to the need to protect the natural heritage. In concluding his statement on the protection of the heritage in the areas of pollution of air and water the President said:

If we are to have that America (an America of clean air and clean streams) we shall have to master the consequences of our own prosperity and the time to begin is now.'

He might have added that we also have to master the consequences of our own numbers resulting from the population explosion, and the consequences of our scientific and technological advance which opens up for us opportunities and problems in the mastery of natural resources. Protection of our natural heritage requires constant vigilance.

3

Perhaps you can see by now where my thoughts are leading. If the American people as a whole are to have the benefits of this great source of energy in western Colorado, Utah, and Wyoming, the resource must be developed without the taint of monopoly. I shall now argue two propositions. The first is that the oil industry in the United States is so highly monopolized that we cannot trust the development of this resource to that industry. The second is that the only instrumentality which is left is the government; and, therefore, I advocate the development of this resource either by a government authority, which I would prefer, or by a quasi-government corporation such as the Communications Satellite Corp., commonly known as Comsat. Permit me now to develop these two propositions.

First, to prove that the oil industry in the United States is highly monopolized is as unnecessary as to attempt to batter down an open door. The facts in this matter are so well known that it is not necessary to repeat them. The oil industry is a monopoly primarily in the sense that it is able to exercise control over supply, and by restricting supply, to raise the price of petroleum energy to all the people of the United States. Unfortunately, this monopoly is protected and sanc

1 Adams, "The Science of Finance" (1898).

2 Congressional Record, p. 8. H.R. 739, Jan. 30, 1967.

3 Ackerman, "Population and Natural Resources, Readings in Resource Management and Conservation" (Burton & Kates, eds.). 4 47 U.S.C. 88 701-744 (1964).

tioned by law-both by State and Federal law-so that the oil industry is in the enviable position and the most antisocial position of all-that of a monopoly protected by public instrumentality for private gain.

Although I do not intend to develop the thesis of monopoly in the petroleum industry I would call to the committee's attention, briefly, the opinion of two authoritative economists. The first of these is Prof. M. A. Adelman of the Massachusetts Institute of Technology. Professor Adelman has estimated that the total cost of monopolistic practices in the oil industry to the American people is in the neighborhood of $4 billion per year. Of this about half is due to our import restriction policy which I shall leave aside for the moment. The other two causes of monopolistic cost and prices in the oil industry are related to the restriction of supply and the raising of price. The first of these is the operation of stripper wells. Now, stripper wells can be operated only when the price is artificially high so that it covers the cost of extraction of only a barrel or two of oil a day from the well. Professor Adelman states:

In Texas alone it would be worth paying about $1.3 billion to get rid of this public nuisance, a liability masquerading as an asset; nationally the savings would be over twice as great * * *. The Russians classify a well producing less than 20 barrels daily as "inactive” and get rid of it as soon as possible; we cherish and fertilize these weeds at the expense of the flowers.

The second form of monopoly waste arises from the advantages which the oil industry enjoys through expensing and depletion allowances in its tax structure. I am informed by an economist formerly with the Bureau of Mines that studies undertaken there show that the tax advantage of the oil industry is somewhere in the magnitude of 25 to 30 percent over other corporations in the United States. I might add parenthetically, I just do not understand why the steel industry and the textile industry and many another industry cheerfully pays taxes at a much higher rate and allows a companion industry to escape. But, this is the fact.

Professor Adelman estimates, after careful calculations, that an end to overdrilling in the United States would bring an annual savings of $2.1 billions, $1.3 billions in developing costs, and $800 million in producing costs. These expenditures are largely artificial and mainly the result of monopoly profits and tax advantages which the petroleum industry enjoys.1

Professor Adelman is a noted authority on the economics of the petroleum industry. His arguments and data are technical and complete. I call to the attention of the committee the article "Efficiency of Resource Use in Crude Petroleum," published in the Southern Economic Journal, vol. 31, October 1964. This article is so important that I have attached it as an appendix to my statement.

(The article referred may be found on p. 515.)

Professional GARNSEY. Only last week a distinguished economist, Dr. Alfred E. Kahn of Cornell University, joined those who have spoken out on this subject. In addressing an oil trade association, he said:

The oil industry mistakenly regards as advantages the proration of crude oil and import controls *

1 Adelman, "Efficiency of Resource Use in Crude Petroleum," Southern Economic Journal, vol. 31, October 1964.

Special tax privileges, like the depletion allowance, lead to heavy investment, which leads to excess capacity, which leads under the prorationing system to cutbacks.

But these cutbacks then lead to increased operating costs, which lead to higher prices, which bring an excessive drilling for more moneymaking opportunities.

This boosts costs, which compels domestic companies to seek lower operating expenses abroad, which results in increased oil imports, which in turn brings cries for governmental protection from domestic companies.1

It is not only economists who recognize the monopolistic character of the crude petroleum industry. In April, 1965 Mr. Gilbert Burck published an article in Fortune magazine entitled "U.S. Oil: A Giant Caught in Its Own Web," a highly suggestive title. A brief quotation will be sufficient to characterize this outspoken and fully documented indictment:

The chief reason the industry is in a (this) predicament is that the production and pricing of U.S. crude have been walled off from free market forces by a system of government controls whose self-defeating complexity is matched not even in the U.S.S.R., and whose affection for special and parochial interest as distinguished from the national interest is matched not even in the myths of the robber barons. The rigging of crude production by the oil-producing states fluorishes in the cause of conservation, competition, and national security, but it has turned out to be an elaborately organized system of government-guided waste that escalates costs and has been not too inaccurately described as a menace to national security.

Even more than most cartels, this cartel fosters neither competition, true conservation, nor national security; and it makes a mockery of national economic efficiency. Real competition by definition exists only when there is a chance that any competitor will get hurt and a certainty that some will; the oil-producing industry commits the classic blunder of confusing the preservation of competition with the preservation of competitors. Because the system results in vastly more wells than necessary, it wastes untold sums in capital and operating expenses.2

All of this brings me to my second quotation from Secretary Udall. In his development program announcement he states:

We must encourage competition in the development and use of oil shale and related mineral resources * * * 3

I suggest to the Secretary and to the Congress that without a sweeping revision of import quotas, proration allowances, and tax advantages, it will be impossible to achieve competition in the petroleum industry. This being the case there is only one other way to protect the interest of the American people and this is to introduce a new competitive force into the industry in the form of a governmental authority for the operation, exploitation, and development of oil shale and related minerals. Therefore, I advocate either a Government corporation such as TVA, or a quasi-private corporation such as the Communications Satellite Corp. to develop this complex of mineral resources.

I now speak of the advantages of a Comsat-type corporation.

The Comsat Corp., as it is familiarly called, comes closer to joining public and private interests in a single business unit than any other commercial organization ever created. Consisting of representatives of authorized communications carriers, representatives of public shareholders, and presidential appointees, the Comsat board of direc

1 Boulder Daily Camera, Apr. 10, 1967.

Burck. "U.S. Oil: A Giant Caught in Its Own Web," Fortune, April 1965. 3 Department of the Interior press release, Jan. 27, 1967.