As a boy, I knew no other fuel excepting wood. We burned it to cook with and to heat with. And, I am sure that in America, today you could not find very much of a demand for wood no matter how much was available. People just do not use it any more. They may burn a log occasionally in the fireplace, but insofar as a fuel is concerned, it is completely outdated.

Now, would it be your feeling that at the present time this oil shale resource seems to have sufficient potential as to warrant the Government's moving forward rapidly in securing its development and utilization?

Professor GARNSEY. That is exactly my position.

Senator HANSEN. You spoke about the failure of the petroleum industry and its inability to discover reserves that are being rapidly depleted. I share this same feeling. I have read statements by the military to the effect that we may indeed be getting ourselves into a situation where we are too dependent upon foreign sources of fuel oil so as to jeopardize our national security.

Professor GARNSEY. I recall some years ago there was a symposium held over at Rifle to discuss shale oil at that stage and this particular symposium was heavily attended by gentlemen from the military and the corridor statements, at least, were that shale would make an ideal jet fuel. It could be refined at a certain stage

Senator HANSEN. Yes.

Professor GARNSEY (continuing). Where it could produce a better fuel for jet engines than ordinary petroleum.

Senator HANSEN. I happened to refer in the speech I made on the floor of the Senate early in February to this aspect of these oil shales, that the oil from these shales makes a very ideal jet fuel. Now

Professor GARNSEY. Excuse me. Could I just make one remark?
Senator HANSEN. Yes.

Professor GARNSEY. This mention of the military aspect of it brings up another point. I am opposed to exploration and development leases as I have explained. I agree with Dr. Galbraith on that. I would point out that the exploration and development funds could well come from the Defense Department and the source of shale could be the Naval Reserve. In that case the Bureau of Land Management lands would not even need to be touched or brought into the controversy at the

moment.

Senator HANSEN. I was going to ask if you share my feeling as to the important role that water will play in the development of these oil shales.

Professor GARNSEY. I am afraid I do not exactly-well, let me put it another way. It is certainly true that water is one of the important resource elements in this whole problem, but here I take, if I may borrow a phase I believe from the chairman this morning, the position of a very hardnosed economist and that is that the "requirements" approach to water is the wrong approach.

Water is a commodity just like any other and the more it costs, the more it will be economized, and I see no reason why this new technology should not be designed with a built-in water-economizing factor in it.

I see no great problem in terms of water supply, for a second reason. Even with a large population in western Colorado, domestic water can be supplied from two sources. One is from impoundment of some

waters allocated to the State of Colorado under the Upper Colorado River compact for domestic use in the Grand Valley. The other is that every economist recognizes that higher uses bid commodities away from lower uses and this shale oil industry will certainly be able to get water which is now by right allocated to agriculture. If by no other device, by buying the water rights from the ranchers and the farmers. And, I must add in all candor that some of the uses of water for agriculture in western Colorado and in parts of Wyoming are marginal.

Senator HANSEN. Well, may I say in that regard that I have been in California in the Owens Valley where those water rights were purchased for use in the Los Angeles area. I agree that these are changes which are brought about by the forces of the economy and when the demand becomes great enough, I have no doubt at all but what we will find this happening. As a matter of fact, it is happening already. Professor GARNSEY. We should say, Senator

Senator HANSEN. And it is one of the reasons that I am concerned about getting on with this job now, because the oil companies, a number of them presently are in the process of acquiring water rights and I think that to delay now only assures that the ability to develop the potential of these oil shale resources will be restricted to fewer and fewer oil companies as time goes along and it is for this reason, among others, that I think that it is of great importance that the Government spell out policies under which these deposits can be developed and can be put to use.

Professor GARNSEY. I think so, too. As a matter of fact, let us say they are late.

Senator HANSEN. If I could, I would like to read, Mr. Chairman, from the statement attributed to Northcutt Ely, quite a water authority as people in Washington know as well as those in California. I am reading now from Mr. Ely. He said: "The effect in Colorado is that there is not enough uncommitted water available for use in the state of origin to supply the anticipated requirements of the oil shale industry." He predicted further, "The time of water supply troubles will be the last two decades of this century which coincides with the anticipated period of vigorous growth of the oil shale industry." And, if I may further, Mr. Chairman, I would like to submit Mr. Ely's statement which was delivered before the fourth oil shale symposium in Denver, Colo., April 6 of this year, and have it included as a part of the record.

Senator HART. It will be.

(The statement of Mr. Ely may be found at p. 534.)

Professor GARNSEY. I have a copy of his statement, too, Senator, and I have read it. It would take us too far afield into Interior's province to say much about it, but just let me say that economists and engineers differ about water. That is why I used that word, "requirements" a moment ago. Engineers seem to think of water in terms of some amount required for something. Economists think of it in terms of a scarce resource which is bought and sold, and we both agree that, even western water law says that domestic use is higher even than agricultural use. I see no great loss if indeed any loss to anyone by shifting water from lower use to higher use, and I would go so far as to say that those who own vested water rights have been able to

capitalize the value of these rights into the prices for their land; and when the shale oil industry comes along and asks to buy this water, they are not going to sell it for nothing. They are going to sell it for a price which will represent a good profit on a capital asset. This is fine. I mean, this is the way the system works. And then, the water will go to the higher use.

This is going on all over Colorado and Wyoming, as you say.

Senator HANSEN. Well, I would agree with what you say there. However, I might add parenthetically that I think domestic use is a higher use even than industrial use, and it occurs to me that however we want to cut the pie, we are still going to have to come to grips with the fact that our demands for water are increasing and this is particularly true on the Colorado. Insofar as long-term checks go, it is indicated that we are getting a lesser amount of water now than we were were back in the days in the twenties when the first Colorado River compact was negotiated.

So, I think here again, we must not be oblivious to this fact. It is going to become more competitive, not less, for this diminishing very vital, important resource, water.

Mr. Chairman, thank you very much. I have no further questions. Senator HART. Thank you.

Mr. Chumbris?

Mr. CHUMBRIS. Thank you very much, Mr. Chairman.

Earlier, before the recess, we were discussing the Tennessee Valley Authority. I thought I would go to the statute and read into the record exactly what the purposes of TVA were and I am reading from title 16, section 301, of the United States Code, 1964 edition. And, I quote now:

For the purpose of maintaining and operating the properties now owned by the United States in the vicinity of the Muscle Shoals, Alabama, in the interests of the national defense, and for agricultural and industrial development, and to improve navigation in the Tennessee River, and to control the destructive flood waters in the Tennessee River and the Mississippi River Basins, there is created a body corporate by the name of the Tennessee Valley Authority, hereinafter referred to as "T Corporation". The Board of Directors first appointed shall be deemed the incorporators and the incorporation shall be held to have been in effect from the date of the first meeting of the Board. This chapter may be cited as the Tennessee Valley Authority Act of 1933.

We will let the record speak for itself in comparing the objectives of the TVA Act and what problem is facing us in the oil shale problem. Professor GARNSEY. Sir, the record cannot speak for itself. These things have to be interpreted and I just repeat my statement and stand on it from here until doomsday, that the TVA was designed to develop the natural resources of a region, and in that sense I see it as an exact parallel to an authority to develop the natural resources of the Piceance Basin.

Mr. CHUMBRIS. When I say the record will speak for itself if Congress is going to get a bill to do the same thing here, then Congress, as it always does, reads the legislative history of the TVA and sees if there is a similarity between that problem in 1933 and the problem they will face when the bill comes before us.

Professor GARNSEY. Well, I am not prepared to speak further on it but if the committee or any other committee would like to hear me discuss this some day, I will be glad to come back.

Mr. CHUMBRIS. I think that invitation is an open invitation.

Senator Hansen has covered quite a few of the points that I think I might have gone into, but I just want to go one step further because the time is running late. I would like to go to your thought of the TVA and the Comsat.

Now, of course, if I understand the record correctly, 72 percent of the land involved is Government owned and 28 percent then would be privately owned. So, if we do go into a TVA type program that would only have to refer to that 72 percent. Then, the remaining 28 percent of the oil shale that is privately owned would then have to be in competition with the Federal Government as far as the full operation. In other words, these people would have to be paying taxes, where the TVA type of operation would not have to pay taxes, and the Federal tax money of ours would have to support the TVA type oil shale program whereas the private corporation would have to do that. So, that is one consideration that would have to be considered.

Professor GARNSEY. Just let me say I would look with great equanimity on these oil companies sitting on their private lands for the next 100 years while the Government went ahead and developed its 72 percent.

Mr. CHUMBRIS. Well, you make any comment you want on these

statements.

Now, coming to the Comsat type of operator our subcommittee did conduct hearings several years ago when the Comsat bill was before Congress. As I understand it, 50 percent of the stock would be publicly owned and the other 50 percent of the stock would be purchased by such companies who were in the communications business, such as RCA, A.T. & T., and others. So, if we did the same thing here, what you would be doing is creating a Government sponsored monopoly to deal with oil shale. Then, those who were lucky enough to buy stock in this so-called Comsat would be in a good stead, but if they were not one of those 50 percent, they would be on the outside just like you say the public may be on the outside on the oil shale program. So, that is another thing that Congress would have to consider if it wanted to go into a Comsat type of operation. Professor GARNSEY. Fifty percent of the stock is owned by the general public. Anybody who wants to can buy it.

Mr. CHUMBRIS. That is right. That is, if you can get there fast enough, but as you recall, when it went on the market it was immediately oversubscribed and the $20 a share suddenly became $60 in less than 22 months, if I remember it correctly, and the Comsat program was not even anywhere near in operation. So, we are talking about windfall, there in a sense we had sort of a windfall. So, it does not affect all the people. The people who were lucky to get there the fastest, not with the "mostest" but who got there fastest.

Professor GARNSEY. Well, a possibility would be to assign the public shares in quotas by States.

Mr. CHUMBRIS. I am just raising a question that might come up on this issue. I have no further questions.

Professor GARNSEY. I am no expert on Comsat. I discuss it in some detail in my prepared statement, you may note footnote 40, in which I quote several phrases from the Comsat Act where it seems to me all you

would have to do is change "communications" to "oil shale," or "minerals complex," and they fit 100 percent.

Mr. CHUMBRIS. My point was, instead of having maybe 5, 10, 15, or 20 oil companies or natural gas companies such as the Cleveland Cliffs Mining Corp., getting into the act, you would have one big corporation which would be divided as the Congress best saw fit to incorporate that particular corporation. So, you would then get to a monopoly corporation that you seem to be so fearful about.

Professor GARNSEY. Sir, there is a very great difference between a private monopoly and a public monopoly. A public monopoly is operated in the public interest and the price policy for the sale of the energy, the oil, would be a policy in the public interest. It comes exactly back to what Senator Hansen and I were saying. This source of energy will be so cheap potentially that the benefits ought to be passed on to every consumer of oil in the country.

Now if it is leased to any kind of total private corporation, as I said before, they are going to operate under the umbrella of the present price structure and so they are going to sell it at a monopoly price. I cannot conceive of a State monopoly selling it at a monopoly price unless Congress decides to collect all its revenues from the oil shale and abolish the income tax.

Mr. CHUMBRIS. For example, you take in the Comsat operation. I will make this very short but the reason why we made it public was so that the rates would be controlled by the Federal Communications Commission. Now I do not know whether there is anything comparable here, why we would need a Comsat type of operation, because there would not need to be a Federal agency to oversee the rates as you have in the Comsat.

We do have a vote coming up, so I quit with that, Mr. Chairman. Professor GARNSEY. Well, the whole burden of my testimony is that the price of petroleum products, the oil shale, must be controlled in the public interest.

Senator HART. Thank you very much. We do appreciate, as Senator Hansen said

Mr. CHUMBRIS. He closed with one statement, Mr. Chairman, that I think ought to be pointed out, that right now under law that is the job of the Secretary of the Interior to see that these leases are distributed in the best public interest and maybe that is the reason why for 35 years nothing has been done about this. That might be one of the reasons.

(The complete statement of Professor Garnsey follows:)

STATEMENT OF DR. MORRIS E. GARNSEY

INTRODUCTION

Mr. Chairman, members of the Committee, I am grateful for the opportunity to appear before you and discuss certain aspects of the problem of the development of our great oil shale resource of the West. For thirty years as a Professor of Economics at the University of Colorado I have been interested in the development of the resource, and long have advocated its full development. I advocate its development today, because it will produce jobs and income, and profits and taxes in Colorado; but most of all because it will greatly benefit the American people as a whole by supplying them with abundant and cheap energy consistent with a growing population and a rising standard of living.

In the Nineteenth Century we subdued the continent and increased our wealth and well-being in large part because of the vast and abundant supply of natural