is adopted and we are forced out of the oil and gas production business, we will then have no taxes to pay because we would have no income.

3. Q. Congressman wold: I wonder if you could give us, from your experience, some idea of the risks involved in exploration? And, if the Task Force recommendations were adopted, how would this affect your exploration activities?

A. Mr. True: I must answer the first part of your two-part question in two ways: First, the last three and one-quarter years we have participated in the drilling of almost 100 wells-nearly 90 of these wells were dry-holes. None resulted in commercial production. Secondly, in the several years preceding these three years, we were very fortunate and discovered properties. If the Task Force recommendations were adopted, our exploration program would be reduced by an amount equal to the reduced income this plan would leave us, plus the increase in income tax which has already been implemented.

4. Q. Congressman Wold: How important are the independents in exploration and development in your area, and do you believe they would be affected in the same general way as you would by the proposed system to substantially reduce crude oil prices?

A. Mr. True. First, they are important and while I cannot quote exact figures, I believe the independents in the Rocky Mountains conform fairly closely to the national picture. In other words, they probably drill about 80 percent of the exploratory wells in our region. The IPAA computer model shows a 90 percent decrease in exploration and development by independents in the next six years, under the price reductions recommended by the Task Force, and I would assume that the reduction in the Rockies would be roughly in the same percentage as it would be nationally.

5. Q. Congressman Wold: Do you believe that the U.S. is "running out of oil?" A. Mr. True: No-I think our own personal exploration program is adequate evidence why I personally do not believe we are running out of oil. There are huge relatively unexplored basins in the Rockies which have the potential of being oil and/or gas productive. Secondly, the rather minor incentives that were added in 1969 in the form of a small crude oil price increase resulted in increased exploration in our State and the production of both crude oil and natural gas is currently at the highest level ever.

6. Q. Congressman Wold: On page 27 of the Task Force report, figures are shown claiming that the oil import program cost consumers in each state millions of dollars. The per capita cost for Wyoming is the highest of any state, equalling $57.00 per year for every man, woman and child. Would you care to comment? A. Mr. True: Well, first it seems to me to be an example of how ridiculous some of the information presented in the Task Force report actually is. I believe that the per capita dependence and well-being based on the price of oil is greater in the State of Wyoming than in any other of the "lower 48." I can well imagine the difficulty that I would have in explaining to an employee, whom we discharge in the future because our markets were taken by foreign crude, that he was actually gaining $57.00 per year himself, $57 for his wife and $57 for each of his children. He might be pretty hard to convince.

7. Q. Congressman Wold: What do you recommend instead of the program proposed by the Task Force?

A. Mr. True: I recommend strongly the continuation of, the cleaning up of, and the proper administration of the present quota system. I believe that this system, impartially operated and accompanied by a more realistic price for natural gas, could do the job it was designed to do, to keep our nation self-sufficient in petroleum production.

Mr. EDMONDSON. Any further questions?

Thank you very much, Mr. True. We appreciate your coming to Washington to appear and testify.

Mr. TRUE. Thank you, sir.

Mr. EDMONDSON. The next witness is our distinguished former colleague and member of this committee, well known to most of us on the committee, former chairman of the subcommittee, and an old friend from the State of Texas, the Honorable Walter E. Rogers,. president, Independent Natural Gas Association of America. We are pleased to welcome you.

46-365-70-20

STATEMENT OF HON. WALTER E. ROGERS, PRESIDENT, INDEPENDENT NATURAL GAS ASSOCIATION OF AMERICA

Mr. ROGERS. Thank you, Mr. Chairman.

I will be as brief as possible and I would say this as a preliminary statement, Mr. Chairman: My statement is divided actually into two parts and I have several attachments to it. I want to present the first part of the statement and ask that the rest be included in the record, and that the attachments be included in the record, those that qualify under the rules and if they do not qualify, they be included in the file. Mr. EDMONDSON. I believe that the complete text of the statement has been already made a part of the record as though read.

And if there is no objection, the documents that appear as appendixes A, B, and so on, the attachments to the statement, will appear in the record following the completed testimony of the witness. Mr. ROGERS. Thank you, Mr. Chairman.

Mr. Edmondson. So ordered.

You may summarize, Walter, if you want to.

Mr. ROGERS. Yes, I will move as fast as possible.

My name is Walter E. Rogers, and I appear here as president of the Independent Natural Gas Association of America, a nonprofit national trade association with its headquarters at 1660 L Street NW., Washington, D.C. 20036.

This organization is comprised of membership including virtually all of the major interstate natural gas pipeline companies in the United States, together with a number of producers of natural gas and gas distribution companies.

The pipeline members of this organization transport over 90 percent of the total natural gas transmitted and hold in interstate commerce anually. The organization is commonly called INGAA, and with your permission will be so referred to in this statement.

The Cabinet Task Force on oil import control, appointed by the President of the United States to study the mandatory oil import program, its present effects and the impact to be expected from possible changes in the program, invited INGAA to submit views on the subject matter under date of July 15, 1969.

The views therein expressed are valid today and will continue to be valid with relation to the mandatory oil import program as related to the natural gas industry.

It seems to me that the basic problem involved is the supply and demand for energy. A review of the past 50 years of the history of this country will reflect that although the population has less than doubled, the energy requirements have more than tripled.

Our population in 1920 was 106 million. In 1968 it was 199 million. The consumption of energy in 1920 was 19,782 trillion B.t.u. In 1968 energy consumption was 62,143 trillion B.t.u. Natural gas consumed in 1920 was 827 trillion B.t.u. In 1968 energy consumption of natural gas was 19,351 trillion B.t.u.

The population will continue to increase, as will the demands for energy. The present discovered sources of energy will continue to deplete. The availability of additional sources to replace those presently being utilized can come only from exploration and additional discovery. Additional exploration and discovery is indispensa

ble to the defense posture and national security of this Nation and to its self-sufficiently among nations in energy requirements for peaceful pursuits.

This was recognized when the mandatory oil import program was established by Presidential proclamation in March of 1959.

The significance of that recognition is as valid today as it was then. We cannot become dependent on any foreign source for our energy requirements.

And the mandatory oil import program has, in my opinion, done more to insure our self-sufficiency in this respect than any other single

program.

The position of INGAA is clearly and concisely stated in our communication to the Cabinet task force heretofore referred to under date of July 15, 1969. Therefore, at the risk of being repetitious, but in the interest of brevity and uniformity, I repeat the position of INGAA and the justification for that position as heretofore stated to the said Cabinet task force, as follows:

The summary of position is this:

(a) INGAA believes that any substantial reduction in or elimination of present oil import quotas or any tampering with the present mandatory oil import program could have a drastic and adverse impact on the exploratory drilling efforts of the domestic oil industry within the continental United States and slow down the search for new domestic supplies of oil and gas.

(b) Discoveries of new gas reserves have not kept pace with demand. The gas pipeline industry is heavily dependent on domestic reserves of natural gas and any action that would serve to depress the petroleum industry's exploration and development activities here, as we believe larger oil imports would, should not be permitted.

(c) No substantial change in the present oil import program is needed or in the public interest.

Now, my comments under part 1 as listed here will be the presentation I was speaking of a minute ago, Mr. Chairman.

The natural gas industry, of which the interstate pipeline system is an integral part, is one of the largest, most vital industries in the Nation. It renders a public service second to none in terms of dependability and economic cost, and provides an important source of fuel energy to the growing, almost insatiable, energy demands of the country. The total gas utility plant investment for all interstate pipeline companies subject to the jurisdiction of the Federal Power Commission amounted to $17.4 billion at the end of 1967 and total revenues received during 1967 were approximately $6.2 billion. Plant and equipment expenditures in 1967 for the overall gas utility and pipeline industry-that is, both pipeline and distribution-were $2,252 million.

In terms of plant investment the natural gas industry ranks sixth in the Nation among industries.

Natural gas provides 31 percent of the Nation's energy supply and is the Nation's second largest source of energy utilized, ranking immediately behind oil.

Sales of major interstate natural gas pipeline companies amounted to 14.5 trillion cubic feet in 1967 and such sales are expected to grow at

an annual rate of about 5.3 percent or more assuming adequate supplies are available.

As of the end of 1967, gas utility and pipeline companies served about 40 million customers of which approximately 36 million were residential consumers of natural gas. According to the American Gas Association, over half of the housing units in the United States in 1967 were heated by gas.

It is apparent from the above that the natural gas industry represents a significant segment of the economy of the Nation and that great dependence is placed upon it to meet this country's present and prospective fuel energy needs.

The huge interstate pipelines which transport the gas to points of consumption rely almost solely on natural gas produced in the continental United States.

Relatively small volumes are imported from Canada and Mexico, and an infinitesimal amount is presently being imported from other foreign countries in the form of liquefied natural gas.

The tremendous investment in pipeline facilities and the urgent need for dependable, low-cost service makes it imperative that the maximum volumes of natural gas possible be discovered and developed within the confines of the continental United States.

While Canada is a growing and important source of supplementary supply, the dependence of the industry is and will remain on U.S. supplies.

Essential to the welfare of the Nation and to the national security is an adequate supply of natural gas.

In recent years, however, there has been a disconcerting change in the overall supply picture which, we believe, would be further aggravated should there be any substantial relaxation of the present oil import control program.

It is the position of INGAA that there should be no change in the present mandatory oil import control program.

The discovery of natural gas historically has been closely associated with the exploration for and discovery of oil. As a matter of fact, much of the natural gas produced and sold in interstate commerce today is produced in association with oil.

Any decrease or slackening in the exploration and development activities of the oil companies in the United States due to larger or unrestricted imports of oil therefore could work to the distinct disadvantage of the gas industry and seriously impair the search for new gas to meet existing and growing demands.

The degree to which domestic oil producers will expend monev for drilling in the continental United States will depend, in part at least, upon the quantities of oil permitted to be imported from foreign

sources.

If import restrictions were removed. or greatly expanded, the end result, we submit, would be to reduce drilling activity and thus reduce the potential for discovering additional reserves of natural gas.

We believe the present gas supply situation presents serious questions to the task force which must carefully be reviewed in the present investigation of the oil import program.

There is growing concern that, due to a number of factors including "estrictive regulatory pricing policies, exploratory drilling in the

United States and the search for natural gas is not keeping pace with the demand.

Drilling activity domestically has been on the down trend for the last 10 to 12 years.

Since 1956, total wells drilled have registered a 43-percent decline, and geophysical activity and wildcat drilling have declined 56 percent and 40 percent, respectively.

Exploratory wells completed as gas producers in 1968 are less than half of those completed in 1959, from 909 to 429. The number of active rotary rigs has declined by 55 percent since 1956. Should these trends contínue, it is obvious that discoveries and additions to gas reserves could be seriously affected.

The American Gas Association recently reported that for the first time since it began keeping such statistics in 1946, natural gas production exceeded new discoveries and total reserves showed a decline in 1968 over 1967.

The AGA report reflected that natural gas reserves as of December 31, 1968, amounted to 287.4 trillion feet as compared to 293 trillion cubic feet as of December 31, 1967, a drop in reserves of 5.6 trillion feet.

Equally significant, however, is that additions to reserves (13,815,577 MM c.f.) were almost 6 trillion cubic feet less than the amount produced in 1968 (19,373,428 MM c.f.). (Appendix A.)

The reserves to production ratio, one of the indicators as to the adequacy of gas supply, declined from 15.9 years in 1967 to 14.8 years in 1968.

In testimony presented on April 14, 1969, to the House Committee on Interior and Insular Affairs, John F. O'Leary, Director, U.S. Bureau of Mines, called attention to the gas supply situation as follows:

"We are beginning to discern already the outlines of a major shortage of natural gas which promises to act as a constraint on expansion of that industry and, of course, on the freedom of choice of individual consumers in the very near future."

A further warning as to the adequacy of our gas supplies was indicated in a recent study published by the Federal Power Commission which showed that domestic natural gas reserves held by 64 major pipeline companies dropped during 1968 for the first time since annual reports of natural gas supplies were initiated by the FPC in 1963 (app. B).

The companies, the Commission stated, added 9.4 trillion cubic feet to gas reserves during 1968. During the same period, however, these same companies produced from their own reserves, or purchased from independent producers, a record volume of 12.8 trillion cubic feet.

It is obvious that should this situation continue, the pipeline industry could seriously be affected and the consumers who depend so much on natural gas to meet their fuel needs would be faced with critical shortages of supply.

The irony of the situation is that large, undiscovered reserves of natural gas underlie the continental United States. In a report recently made by the potential gas committee, an independent agency sponsored by the Mineral Resources Institute of the Colorado School of Mines and financed by the American Gas Association, the American