It is significant that the first commercial production of oil shale will be done by a firm-Tosco-not dominated by a major oil company, yet many of the majors already held more oil shale land than Tosco.

The Tosco witness did voice support for the program as outlined by the Secretary. But he was making an assumption that in a series of regulations yet to be drawn and developed, he would either be given credit somehow for capital investment in research and development he has now done, or would in some method yet to be described, find access

to acreage.

It seems to me that this phase of the Secretary's program may be geared toward monopolization, not competition; to slow, haphazard development, not fast, coordinated development.

Certainly it requires a detailed and subjective type of Government regulation for decades to come-subjective decisions by the Secretary on every phase of the development program, beginning with the decision of what individual company's research and development program seems to make the most sense and how much land should it entitle him to. I would feel more comfortable under this plan if Stewart Udall would be the Secretary for these decades to come. Of course, he will not.

To put it bluntly, there is less chance of monopolization in direct bidding within antitrust concepts which themselves are not regulations than in a series of regulations and subjective decisions tailored to a developing and emerging industry.

The intrusion of regulation would be substantially less desirable than turning loose the land under competitive bidding, with substantial rents to require a commitment on a company's part to develop them. At least I can see the argument being made that you invite a degree of regulation far higher under the program that was sketched by the Secretary, than one which would simply provide for the unlocking of the resource under competitive bidding opportunities and as I said, substantial rentals, as suggested in the presentation by Professor Mead.

It seems to me we ought to keep our minds open and ask without unnecessary preconceptions, whether this would not be a freer, less regulated approach than the program proposed.

Under that program, the Secretary is going to have to determine, among other things, the size of leases to be given. We have been told several companies have requested 5,210 acres, arguing this size is needed for efficient development.

I am sure those arguments will continue as Secretaries change. Professor Mead pointed out, "If such leases were in fact made, they would probably become either scandalous or ruinous, and the former is more likely than the latter."

Alternates were discussed during the hearings. A suggestion made by Professor Mead appears to offer a minimum of Government regulation and a maximum of competition with economic incentives to get the minerals and petroleum out of the ground as quickly as possible, and this rather than under Government regulation.

The other alternatives presented certainly deserve thorough and probing analysis.

Finally, the congressional directive in the Mineral Leasing Act for the "prevention of monopoly" can be met by having the Government expert in monopoly problems-the Attorney General-play an active role in assessing any development program and regulations. If he is not invited in, he should invite himself in. This should insure that proper focus will be placed on development consistent with competitive principles of free enterprise. We have a precedent. The AEC is working jointly with the Attorney General in examining competitive factors in developing the nuclear energy industry. The precedent logically extends into the development of the minerals on shale oil land.

The role that "water rights" must play in the competitive development of this resource is a factor yet to be analyzed and understood. We look forward to receiving information the Department of the Interior has promised on this aspect as well as the proposed regulations.

Mr. CHUMBRIS. Mr. Chairman, I just wanted to make one comment. Senator Dirksen was here at the opening day of the hearings, and Senator Hruska, and Senator Fong, the other two minority members of the subcommittee were present but could not be here today. But I know that they express publicly to Senator Hansen their appreciation for his being here throughout these hearings, to present his great knowledge and experience, both as a Senator and as a former Governor from Wyoming on this subject of oil shale. I know if they were here, they would like to make that comment for the record-their appreciation, Senator Hansen, for your being here during these hearings. Senator HANSEN. Thank you.

Senator HART. If there is no further comment, the hearings are

Senator HANSEN. Mr. Chairman, excuse me. I think I recall that you had requested that the Assistant Attorney General, Mr. Turner, supply the committee with certain additional documents some time ago. If we might, I would like to ask if we could be furnished with whatever copies of documents pertinent to these hearings that are presented to the committee.

Senator HART. Indeed, yes.

Senator HANSEN. I would like to ask, too, for copies of Interior submissions to the committee. It seems to me their feelings in this regard may have pertinency to these hearings.

Senator HART. Let me enter the order to cover all documents that the subcommittee may receive, that we advise Senator Hansen of any additional ones, in case he would like to have copies.

Senator HANSEN. If I may be given the further consideration of one additional word, it would be to add that I compliment the chairman for a very thoughtful and incisive statement. I agree with you that arbitrary Government judgment with respect to lease applicants certainly is most dangerous. I think you have done a great job in chairing these hearings.

Senator HART. The thanks that Senator Hansen has voiced to Mr. Cohen and Mr. Bangert, I will echo. Particularly I think the record should reflect that the development of the detail of these hearings has been in the hands of Mr. Bangert.

I was just thinking about Senator Hansen's last comment about the Government avoiding arbitrary decisions.

It is my feeling that-and maybe "arbitrary" is the wrong adjective, because it has an overtone of indifference to fact-I do not mean it in that sense, but it seems to me inevitably that the decision with respect to acreage in connection with subsequent leases is going to be arbitrary under the program. It seems to have built into it this aspect of concern. But perhaps the adjective is what gives us trouble.

Senator HANSEN. Senator Hart, I think you made a most responsible criticism. I would like to say that when the leasing arrangements are promulgated and exposed to public view, we certainly will want to consider them at that time in greater detail. I could not, though. miss the opportunity to compliment you on a very excellent statement. I reiterate that one more time.

Senator HART. We stand adjourned at the call of the chair.

(Whereupon, at 11:40 a.m., the subcommittee was adjourned, to reconvene subject to the call of the chair.)

(EDITOR'S NOTE: Based on these hearings, Chairman Hart subsequently outlined a proposed oil shale policy in remarks on the Senate floor. These follow :)

FLOOR REMARKS BY SENATOR PHILIP A. HART (DEMOCRAT, OF MICHIGAN) ON THE DEVELOPMENT OF A NATIONAL OIL SHALE POLICY

Turmoil in the Middle East again dramatizes the importance of oil to the industrialized nations of the world. And it should make more compelling the desirability of swift development of the oil-and aluminum and sodium-locked in the shale reserves of Colorado, Wyoming and Utah.

The shale land in these three states is estimated to contain almost 70 times the nation's proved reserves of crude petroleum. During eight days of hearings held by the Senate Antitrust and Monopoly Subcommittee, estimates of the number of barrels which could be extracted from the shale ran from 360 billion to 2 trillion. That is a wide spread but when you consider that this country uses only about three and a half billion barrels yearly, no matter what estimate you accept, it adds up to a lot of oil in those shale deposits. In addition, substantial amounts of sodium and aluminum are present.

Approximately 11 million acres of this land-or 80 percent-are owned by the government and 350,000 acres by private owners. Of the 350,000 acres, about 205,000 acres are owned by major oil companies. The government land has been encumbered by the filing of almost 2,500 claims by private parties covering close to 4,000,000 acres. These claims are being contested by the Interior Department.

To put these sums in perspective consider that a 500 acre plot of land-with 25-barrel-per-ton shale would contain approximately 1,800,000.000 barrels of oil. The question is: how best can we develop the resource?

I am convinced that the way to obtain early development is to insure maximum competition-not monopolization.

The danger of stagnation which monopoly would bring was recognized back in 1920 by the framers of the Mineral Leasing Act. They wrote into the law the requirement that in any leasing arrangement provision should be made "for the prevention of monopoly."

On May 7 the Secretary of the Interior issued regulations establishing a government oil shale leasing policy. As I see it, this program would have some very unhappy results-monopolization by the major integrated American oil companies of the resources locked in these shale deposits, higher consumer prices in the long run for petroleum products, lackadaisical development of the

resource.

There are three prerequisites for private development of the resource: land, technology and economic incentive.

With 350,000 acres of this land now held by private owners, the government proposes to make an additional 30,000 acres available under the new regulations. One can ask why any government land is necessary in view of the vast acreage in private hands. The government acreage to be made available is so small one wonders if it would have significant impact on development of the resource.

It is indeed doubtful if government land is necessary to development of this resource. But assuming a case can be made for leasing, it can be made only if the additional land goes into hands not now handling acreage. And not then if those new hands have economic interests which obviously work against development of the resource.

Any discussion of acres is meaningless unless related to the barrels of oil contained in the acres. Combinations of figures can be put together and result in wide differences in the total oil said to be in the deposit. Adopt a median figure assuming that 30,000 acres contain 25-barrel-per-ton shale (which would be neither the smallest nor largest amount in the area), then the oil involved would be 1,800,000,000 barrels per year for the next 50 years (almost two-thirds of our yearly consumption for half a century). Small wonder that those companies with substantial investment in other oil reserves would serve their own economic interests by keeping shale oil development to a minimum, or by keeping the production under their own control. Additionally, some of these oil companies have what appears to be a greater interest and investment in developing other sources of energy such as coal and uranium.

During our hearings witnesses advised us that technology is presently available through mining methods to market this resource at prices competitive with conventional crude.

Much of the initial mining and “retort” technology was developed by the government at the Rifle Plant in Colorado following World War II. At the point that a major breakthrough seemed imminent, its funds were cut off, and after 10 years of extensive work and $15 million of tax expenditures, the plant forced to close down. Subsequently, the plant was reopened under the auspices of the Colorado School of Mines Foundation and by agreement is being operated by six of the major integrated oil companies.

Since the oil companies have taken over Rifle, it is difficult to discover what, if any, progress is being made.

In any case, government research conducted during the period the plant was open did contribute to the basis "retort technology."

Beginning in 1957, Tosco, an independent corporation, began acquiring land and experimenting with a pilot plant operation for retorting oil shale. In 1964 Tosco joined with Cleveland Cliff Iron Company and Standard Oil of Ohio to establish the operability and economics of the system developed by Tosco. As a result of this work Tosco has commissioned a contractor to build a commercial plant and expects to have production of 58,000 barrels daily by 1970.

Its vice president testified that Tosco technology is available to anyone upon payment of a reasonable royalty.

This indicates there is sufficient technology now available to begin construction of production facilities, if the present owners of the 350,000 acres now in private hands want production.

In fact, Orlo Childs, director of the University of Colorado School of Mines Foundation program, has pointed out that insofar as the retort "mining process" is concerned the kind of research needed now grows out of the actual production of the material. He described it as an "on going situation.”

Future technology will center on the "in situ" process that depends on underground explosions which shatter the shale formations under high heat conditions causing the oil to collect in pools which are then pumped out. This technology is in its infancy and is being developed by an AEC-private industry consortium which is only now getting under way. At the present rate of activity, it may well be years before this technology is perfected.

Economic incentive would seem to favor development by other than the big oil companies. Most of the majors-oil crisis notwithstanding-have huge investments in traditional crude sources. It would appear not to be in their best economic interests to see shale reserves developed rapidly.

Consider the experience of Union Oil Company. Union Oil does not have vast crude reserves, but it does own substantial shale oil lands-50,000 acres. It had spent $15 million for research and development looking towards oil from shale, in order to improve its crude position. But when it appeared that Union was on the threshold of development of shale oil, the Gulf Oil Company purchased $120 million of Union's convertible debentures and placed the vice chairman of the Mellon Bank on Union's Board of Directors. Mellon interests control Gulf. Thereafter Gulf began supplying Union with one-fourth of its requirements for purchased crude with Gulf's Kuwait oil. Union's research and development ceased after this arrangement-to the apparent benefit of both Gulf and Union. This

example explains why it seems to me that international oil companies with huge reserves of cheap foreign crude do not want rapid development of shale oil.

Yet the Secretary's program would have the practical effect of freezing out potential competitors and guaranteeing that only the major oil companies could participate.

Why would the program have this effect? Because it ties leasing of the land to long-term research programs. The Secretary would lease land to private industry in return for research and development work by the lessees. Apparently the Secretary initially would determine which research programs were acceptable. After the research period (not to exceed 10 years), the Secretary would determine how much additional land to allow the successful researcher for commercial development (not to exceed 5,120 acres). Those not successful in their research or who did not participate would get no land. Royalties would be determined on the basis of net income obtained from sale of the mineral extracted. To one concerned with speedy development, the flaws seem apparent. First, the use of land subsidies to encourage research would discourage all but the largest integrated oil companies from competition for the leases. The economic strength of these companies makes it possible for them to pay for land leases which may produce nothing for a number of years and to engage in research programs without any hope for short-range returns-but which could lead to great profits in the long run.

Second, it would keep enterprising companies willing to proceed with present technology from actually beginning production of the resources. Companies which need to begin early production to support financially their activity simply cannot afford a lengthy research and development program. Only a company with substantial profits from other activities could do so.

Third, it would keep some of the best sources of research and development— the smaller research oriented corporations which specialize in research, not production—from becoming involved. Research specialists-from whom some of our most dramatic technological advances come-for all practical purposes would be frozen out of the program.

Fourth, the program-favoring as it does the large integrated oil companywould discourage total development of all the resources involved, particularly aluminum and sodium. Given the present state of technology, limited as it is to oil recovery processes, there would be no incentive for other than oil companies to participate in the program and their expertise is in drilling-not mining. Fifth, it requires the most pervasive kind of continuous government regulation with subjective decisions to be made on a regular basis. This could be a stifling barrier to rapid development, and an open invitation to charges of "giveaway” no matter how proper the decisions.

Sixth, the system of royalties, based on net income, means that no royalties need to be paid until net income reaches a certain point. Economic incentive to intensive development, therefore, would not be present for an integrated company with other sources of net income. An integrated oil company whose best interest might be served by sitting on the land, rather than developing it, and by keeping others from getting leases, would find this provision tailormade to its interests. In addition, a word of caution is necessary with respect to the "blocking up" part of the Secretary's plan which would trade government oil shale land for private oil shale land. I am told that such a trade is without precedent with respect to minerals because value cannot be determined adequately. Even in timber land exchanges, where the resource exchanged can be seen and tabulated, there is continual disagreement between the government and industry as to the value of the respective pieces of land. How much more tenuous would be the determination with respect to the value of oil shale!

One aspect of the program should be applauded vigorously. It provides that the governments will acquire title to all inventions made in the course of the research under the lease, and the further requirements for licensing of other patents necessary to development of the resource. Protection is accorded the researchdeveloper in event of exceptional circumstances and a reasonable royalty is provided for patents owned by the research-developer.

Making all technology available to the public at the earliest moment is vital to rapid and competitive development of the resource.

Having raised these criticisms, let me suggest alternatives for the early development of the resources-not just the oil, but the aluminum and sodium:

First, public land (perhaps 30,000 acres is a good start) should be thrown open to leasing on a bid basis. It should not be tied in to research and development. It is conceivable that smaller companies and consortiums could raise