Senator TOWNSEND. You wish to place these petitions in the record? Mr. THOMPSON. Yes, sir; I hope so. Here is a little map, Senator, that shows the developments since. the Connally Act has been in effect Senator CONNALLY. If there is no objection, Senator Townsend, we will put these petitions and the signatures in the record. (The petitions referred to will be found at the end of Mr. Thompson's testimony.) Mr. THOMPSON. This map shows the new discoveries in Texas-new fields developed within the last 12 months. All over the State you will find forty-odd new pools-all over the State; 141 counties of the 254 have oil. That, to my mind, demonstrates the oil business is in a healthy condition, because new development does not come when there is too long a haul. It used to be that an oil man had a very difficult time in Texas, or anywhere else, to borrow money to do his development upon. To my certain knowledge, and I am sure the men here will bear me out, that within the last few months, in Texas, money has been seeking loans on oil-producing property at 4 and 5 percent for as long as 36 months. (The map referred to is on file with the committee.) Senator TOWNSEND. Could he not borrow money from the Government? Mr. THOMPSON. I do not believe the oil men have that privilege. Senator TOWNSEND. There must be something wrong; you want to look into that. Mr. THOMPSON. They can find all of the money they need at 3 and 4 percent for 36 months' time. This map shows the development that is going on in our State. Each of your voting districts are doing fine, Senator. Senator CONNALLY. Thank you, Colonel. I wish you would develop that Jones County field pretty thoroughly; I have a tract of land down there. Mr. THOMPSON. I thank you for the opportunity of appearing, Senator. Senator CONNALLY. I am not through with you yet. Colonel Thompson, there have been certain interests that have filed a protest because of the continuance of this act, because they say we not do provide regulation of hours, wages, and things of that kind. I want to ask you whether or not the matter of the actual production of oil under your present set-up is wholly within State jurisdiction and that this act only affects the oil after it has been produced and brought to the top of the ground, and then only affects it as to its movement in interstate commerce? Mr. THOMPSON. That is correct. Senator CONNALLY. So we do not intend to do anything with regard to the actual production of the oil since that is regulated by the laws of Texas? Mr. THOMPSON. The actual production of oil and the rules and regulations and laws covering it are strictly a State matter. Senator CONNALLY. That has been the Railroad Commission's function from the beginning? Mr. THOMPSON. Consistent, always. Senator CONNALLY. And this act does not do anything more than to say that oil produced in violation of your laws and regulations shall not move in interstate commerce? Mr. THOMPSON. Just like a stolen automobile cannot move across a State line, like the Dyer Act. Senator CONNALLY. So the method of production is not within the scope of this legislation? Mr. THOMPSON. It would not be germane, if that is the proper word in that connection. Senator CONNALLY. Not germane, and incompetent, irrelevant, and immaterial. Mr. THOMPSON. Yes. Senator CONNALLY. I want to ask you one other thing about price Mr. THOMPSON. We never discuss price in our oil regulations. Senator CONNALLY. I mean the effect of conservation on prices. Mr. THOMPSON. Yes. Senator CONNALLY. I understand the commission does not take cognizance of that, but as a matter of economics, would the steady and continuous and orderly production of oil have a better effect upon a consumer's price than a wildly, uncontrolled production in flash periods, and then a recession and collapse in subsequent periods; which is more desirable from the consumer's standpoint? Mr. THOMPSON. You mean in the long run? Senator CONNALLY. Yes. Mr. THOMPSON. In the long run, a steady, dependable supply would be to the interest of the consumer, decidedly. Senator CONNALLY. It has been testified by Mr. Swanson of the Bureau of Mines that there is a relationship between the wholesale price of gasoline and of crude oil, that the relationship is 181⁄2 times. Have you anything to say about that as to whether it has been well maintained in the oil under the operation of this act, whether that relationship has been maintained? Mr. THOMPSON. The price of gasoline at the refinery multiplied by 18% would be the price of crude? Senator CONNALLY. Yes. Has that relationship been maintained? Mr. THOMPSON. That is about what it is. It used to be, Senator, that when oil went up a quarter, gasoline would go up 1 cent. That is, a 1-cent increase in the price of gas would justify a two-bit increase in crude, and if gasoline went down a cent, crude would drop a quarter. Senator TOWNSEND. What is the price of crude oil now? Mr. THOMPSON. It is about $1.20, throughout the Nation. It is $1.27 in this field because it is very highly desirable sweet crude and also is close to tidewater. The price varies according to the distance from tidewater, because they have to pay the pipe lines according to distance. This is only 15 cents to the Gulf, whereas in west Texas it is much higher. It runs from 81 cents to $1.07 in west Texas. Senator CONNALLY. Of course, the production cost of drilling wells and getting the oil out does not always decline or advance with the price of crude; in other words, in a period when crude is low when the price of crude oil is very low, is it not true that that spread between gasoline and crude is less than it is when the price goes up? Mr. THOMPSON. When crude is very cheap, the consumer does not get a reflected benefit; that is, gasoline stays the same even though the crude does not. Crude might go to 8 cents a barrel and gasoline would still sell for 10 cents a gallon. Senator CONNALLY. In other words, the fixed charges involved in production cannot be always proportionately reflected in the price of gasoline? Mr. THOMPSON. The cheaper you get the crude the more out of proportion it would be. Senator CONNALLY. That is what I am getting at. Mr. THOMPSON. I might say, Senator, in our law in Texas, the last section of the conservation law, says that we shall take crude in planning production to meet market demands. We would have a large waste above ground if we produced more than we could absorb. The oil evaporates and leaves the crude heavy and less desirable. The lighter you can get the oil, the more desirable. So, our legislature passed an act to prevent, as a form of waste, the production of more oil than the market provided for, but it provides also that the State railroad commission should keep the consumer of gaoline in mind. You know there are 6,000,000 consumers in Texas as against 11,000 producers, and, Senator, you know that being elected to office, like I am, we keep the 6,000,000 in mind against the 11,000. Senator CONNALLY. If we do not, they are apt to keep us in mind. Mr. THOMPSON. That is right. That is the safety of the folks who entrust the administrators to look after them; and also the consumer is benefited by our seeing that the oil is produced in an orderly fashion and that a low price of gasoline over a long period of time results. Senator CONNALLY. The difference in this East Texas field of 4,000,000,000 barrels as now expected and the 2,000,000,000 barrels which were originally estimated means the consumer will have 2,000,000,000 barrels more of oil from which to get his gasoline. Mr. THOMPSON. And for which they are indebted to you, Senator. Senator CONNALLY. I do not claim that. Mr. THOMPSON. At least, to the Connally Act. Senator CONNALLY. What are the depths of these wells in the East Texas field? Mr. THOMPSON. We have wells down as low as 10,000 feet. Mr. THOMPSON. 3,400; about the same, all of them. Senator CONNALLY. What about the others? Mr. THOMPSON. Anywhere from 1,200 to 10,000. Mr. THOMPSON. Around the northern part. We have the Abercrombie Harrison, 10,000, 35 pounds to the square inch pressure, the highest in the State. Those wells cost $250,000 to drill, Senator." Senator CONNALLY. I cannot handle them. In each field are the wells approximately the same general depth, as a rule? Mr. THOMPSON. Yes; unless you have several oil-bearing strata. You may get three or four pays in the same well. Each drilling may produce separate oil-bearing strata. Senator TOWNSEND. In this well where it is 10,000 feet, did you strike sand at any other depth? Mr. THOMPSON. They hit three or four, but not in paying quantity, but they got a good well at 10,000 feet. Senator CONNALLY. Under the laws of Texas and your regulations of the Railroad Commission, there is complete jurisdiction over the whole matter of production. Do you have provisions as to when and where they may drill oil wells? Mr. THOMPSON. They must first get a permit and then they drill under our direction, with a supervisor watching them. When the well is ready to drill in, we supervise that and the casing program and every detail. We have 370 men doing this work. Senator CONNALLY. You have jurisdiction over spacing, acreage, and all of that? Mr. THOMPSON. The whole thing, from inception to the final movement of the oil. Senator CONNALLY. Is there any other matter, Colonel, you desire to develop? Mr. THOMPSON. Nothing, except to thank you for the opportunity of coming. Senator CONNALLY. We are very glad indeed to have you, Colonel; and I want to thank you and your commission for cooperating so well with the Federal authorities on this oil program. Mr. THOMPSON. We found it a very pleasant experience to work with them and we hope they feel we have been of as much help to them as we know they have been to us. I think we have all done our best to help each other. There has been some little difference between the Bureau of Mines' figures on estimated demand and Texas' actual production; but the trouble is, I think, that the Bureau of Mines has not caught up with the demand due to the prosperity that is in the land; we are closer to the market; but we think their figures will finally catch up; their figures are just a little slow. Thank you, Senator. Senator CONNALLY. You may make any further statements you desire, Colonel. Mr. THOMPSON. I am through. If I think of anything else I will send it to you. I might point out that this petition which I have just filed asks for only a 2-year extension of the Connally Act, but I believe the law should be made more permanent. Senator CONNALLY. Thank you, Colonel. Mr. THOMPSON. I will say further that these gentlemen who signed that petition instructed me that if it looked like it should be made permanent, they were willing that the petition should be changed from 2 years to make it permanent. I have that permission. Senator CONNALLY. We are glad to have had you here, Colonel. The statement and petitions referred to are as follows: STATEMENT OF ERNEST O. THOMPSON, MEMBER OF RAILROAD COMMISSION OF TEXAS, CHAIRMAN OF INTERSTATE OIL COMPACT COMMISSION THE OIL AND GAS INDUSTRY IN TEXAS Texas eased unobtrusively into the petroleum-producing picture along about the year 1865 with the discovery of oil at Oil Springs, 15 miles south of Nacogdoches. No intimation of the prolific reserves of this State was had, however, until the discovery of the Corsicana pool in 1895. The unprecedented rushing flow of oil from the Lucas gusher in Spindletop July 10, 1901, started the industry and etched the outline of Texas firmly on the background of world-oil reserves. Gaining rapidly, Texas in 1902 produced over 18 million barrels of oil, or approximately 20.37 percent of the Nation's total. As of January 1, 1937, there were 68,175 producing oil wells in the State, whose combined producing capacities exceed 34,000,000 barrels of oil daily. At the end of 1936 Texas had produced 15.83 percent of the total oil recovered in the world and 24.69 percent of the total United States production. That Texas is steadily advancing her position of dominance is evidenced by the fact that for the year 1936, she produced 39 percent of the United States production and 23.58 percent of that of the world. It is significant that Texas, the world's foremost oil- and gas-producing areawhich at the end of 1936 possessed 52 percent of the reserves of the United States, and which was credited with approximately 50 percent of the newly discovered reserves during that year-should also contain within her boundaries both the largest oil field and the largest gas field in the world. No other single reservoir in the world is comparable to the East Texas field with its 21,960 (Jan. 1, 1937) producing oil wells. Besides the Panhandle gas field, whose 1,303 producing gas wells have a combined producing capacity of approximately 22,000,000,000 cubic feet of natural gas daily, any other gas-producing area is insignificant. Other gas reserves, which in many cases are just now beginning to be tapped, bring the total State potential capacity to more than 39,000,000,000 cubic feet daily. Through the wider appreciation of the benefits of conservation, the dissemination of more efficient production methods, and the insistent attitude of the Railroad Commission that waste be eliminated and production be limited to market demand, practical estimates of the total reserves of Texas have risen in many instances. Texas' position in the oil industry grows increasingly bright, as reflected in the following data: ESTIMATES OF PETROLEUM RESERVES OF THE UNITED STATES A study of the various estimates of petroleum reserves of the United States, which have been made from 1908 to 1936, shows that many types of yardsticks were used in estimating oil reserves. The growing importance of knowing the extent of oil reserves has demonstrated the need for more precise and uniform calculations. For that reason, the more recent estimates lend themselves better to comparison, one with the other, in the light of changing developments of known producing areas. Outlined below are six of the most recent estimates of the oil reserves of the United States: Year Estimated Authority Barrels 1932 1933. 12, 000, 000, 000 1934 1935 Federal Oil Conservation Board-"Known reserves". (Federal Oil Garfias-"Proven Oil Reserves-the oil that yet remains underground 1936. 12,992, 000, 000 1937. Warren L. Baker, editor The Oil Weekly.-"Extractable by Ordinary Producing Methods in Current Use.' (The Oil Weekly, Jan. 10, p. 19), with assistance of leading geologists.) 12,980,000,000 Warren L. Baker, editor The Oil Weekly.-"Estimates of the Underground Supply of Crude Oil in known United States fields that is extractable by current producing methods," as of Jan. 1, 1937. (The Oil Weekly, Jan. 25, 1937, p. 20.) |