To realize this we must pare five billion dollars from an annual domestic production of approximately four billion barrels or a value of twelve billion dollars. This would result in an adjusted value of seven billion dollars or less than $2.00 per barrel average. Such a depressed price effectively eliminates the domestic industry from world competition. It is difficult to imagine domestic companies continuing to produce oil under such conditions. If even half the industry could afford to continue operations, resulting production would be reduced to two billion barrels annually with a value of four billion dollars. The "saving" has netted the U.S. economy a loss of eight billion dollars. Further, the money paid for imported oil is not kept at home for the dissemination throughout our own tax-paying society, but rather is flowing out as a deficit balance of payments item. Paragraph 410 minimizes the effect of loss of revenue to both the general U.S. economy and State and local governments. In my previous statements I have pointed out the eight billion dollar loss to the general economy. State revenues are proportionately affected. In Wyoming the oil industry pays 40% of the real property taxes through crude oil taxation and real estate levies. In the absence of this revenue, taxpayers must take up the slack to maintain school systems, established public works programs and normal government. Similarly, the Federal government loses production royalty on public lands. Is the "American Consumer", who is also a taxpayer, actually netting a saving on oil products if his tax burden is increased accordingly? A viable society is a producing society, with a balance struck between its production and consumption. Foremost among its commodities must be natural resources, with which the U.S. is singularly blessed. Their resources are of little value unless discovered and sensibly produced. To write off even the energy represented by what the Task Force describes as “inefficiently utilized production" (stripper wells) is gross waste and illustrates the arbitrary conclusions reached by a group of men unfamiliar with the industry they are adversely affecting with their recommendations. Other industries than oil should carefully watch these proceedings on import restrictions by the Federal government, for if the idealists are to strictly save the American consumer all they can, then the floodgates should open to unrestricted imports on steel, autos, textiles, dairy products and, yes, even labor. The end result of being a consumer-only nation is, of course, obvious. It is equally obvious that protectionism in certain areas is a fact of life if we are to continue to enjoy a progressively higher standard of living. An oil industry committee should be impanelled to speak for the domestic producers regarding each paragraph in the Task Force report. Without rebuttal, our industry is threatened, as is an important segment of the U.S. economy, by arbitrary and premature judgements. Very truly yours, VINCENT L. WHITE. WYOMING ASSOCIATION OF PETROLEUM LANDMEN, Hon. JOHN S. WOLD, U.S. Congressman, 1323 Longworth House Office Building, Washington, D.C. DEAR JOHN: The Wyoming Association of Petroleum Landmen urges continuation of the present oil import quota system. National security may well depend upon production of domestic reserves. Thirty-seven per cent of the 1969 tax valuation for Wyoming was contributed by the oil industry. Approximately 10,000 persons are employed by the oil industry in Wyoming with a payroll of $75,000,000. The operation of schools and of many governmental entities rely in large part upon revenue resulting from oil production. Other segments of the economy rely upon oil production for their very existence. Sixty-two per cent of the oil and gas rights in Wyoming are held by the United States of America. Royalties paid to the United States support reclamation (52%), the State of Wyoming (37%), and the general funds (10%). Thus; the production from public lands is shared by the entire nation and all of the nation would be affected by significant loss in royalties from these lands. Wyoming depends in large part upon the exploratory work of independent operators. A change resulting in lower prices or limitation of market would cripple the efforts of the independents, and eliminate many from the industry. It would seriously damage or eliminate from operation the ten refineries in Wyoming. Ranching, farming, and other mineral extracting industries are not prepared to fill in the gap caused by a price decline or limitation of marketing facilities for oil. Stripper well production or other production in small amounts occurs in many places in Wyoming. For so long as they operate, these supply royalties, taxes, and employment. Once plugged, these operations could never resume because it would be economically unfeasible to drill new wells. If left to operate under our present system, these fields are now assets and make in the aggregate a worthy contribution to the economy of Wyoming. Other states in the Rocky Mountains are facing similar situations, and the entire nation has a stake in production from federal lands. Please enter this letter as the statement of the Wyoming Association of Petroleum Landmen. Very truly yours, JOHN E. NORMAN, President. Casper, Wyo., March 5, 1970. NATRONA COUNTY HIGH SCHOOL DISTRICT AND SCHOOL DISTRICT No. 2, Hon. JOHN WOLD, Washington, D.C. DEAR MR. WOLD: Thank you for the opportunity to present a statement to the House Interior Subcommittee on Mines and Mining at their hearing on the question of oil import quotas. Public education and other tax supported services in Wyoming could not survive a significant reduction in tax revenue from the oil industry of our state. The direct and indirect taxes from the industry in Natrona County, for example, provide about 60% of our operating income. It might, of course, be possible to replace this with other revenues but the loss of taxes coupled with a weakened domestic industry, if tariffs replace the existing quota system, would make such a change seem unwise. Nothing I have read convinces me that there would be a gain for other elements of the population of the United States from a change in the present import policy and I would urge the Subcommittee to examine carefully the recommendations of the Cabinet Task Force on Imports. The public services of Wyoming are generously supported by a strong oil industry. Planning that would weaken it would seem to be foolhardy. Sincerely yours, MAURICE F. GRIFFITH. WYOMING WOOL GROWERS ASSOCIATION, Hon. RICHARD M. NIXON. President of the United States, White House, Washington, D.C. DEAR MR. PRESIDENT: The attached resolution was unanimously adopted by the Executive Committee of the Wyoming Wool Growers Association during its meeting in Casper, Wyoming on February 20, 1970. The oil and agriculture industries in Wyoming rank first and second, respectively, as contributors to the educational system, county, and state governments and the economy of Wyoming in general. If either of these two industries were cut back because of any action by the administration or the federal government, the economy of Wyoming would suffer. Therefore, we respectfully request your careful consideration of the attached resolution. Very truly yours, EDDIE MOORE, President. RESOLUTION Whereas the Cabinet Task Force Study on oil imports into the United States has indicated that serious consideration is being given to two possible courses of action, one of which would be to substantially increase imports and the other to impose a tariff which would be adjustable but with the avowed intent of depressing the price of crude oil in the United States, and Whereas such action is a complete reversal of previous actions on various commodities which limit imports and only impose tariffs to protect American production, and Whereas the sliding scale tariff would actually constitute a price control measure, and Whereas there are many reasons foremost of which is the need for selfsufficiency within our country's boundaries at times of national emergency, and Whereas widespread federal, state, county and school districts' economies would be drastically, adversely affected, and Whereas widespread unemployment and severely curtailed exploration would result from these plans, and Whereas there is ample evidence, particularly in view of the tax reform legis lation which cuts the percentage depletion provision, that the domestic industry should receive incentives in the form of price protection from cheap foreign imports rather than further depression; we do hereby Resolve and urge that President Richard M. Nixon reject the proposals for increased imports or a tariff system. Unanimously adopted this 20th day of February in the year of our Lord 1970 by the Wyoming Wool Growers Association. EDDIE MOORE, President. ROBERT P. BLEDSOE, Executive Secretary. Although much has already been said, I would like the opportunity to further elaborate my feelings on the question of oil imports. In 1959, President Eisenhower established the current oil import quota system. His action followed 3 years of unsatisfactory attempts to control foreign petroleum imports on a voluntary basis after the Suez crisis of 1956. The system has been in operation for over a decade now. With few exceptions it has been an unqualified success in insuring an adequate and nationally secure supply of petroleum at reasonable rates. The reasons for the imposition of the quota system were sound. I believe they are equally sound today and are, in fact reinforced by other criteria. The task force recommendations that the quota system be replaced by a preferential tariff designed to reduce the price of domestic crude by between 30 and 80 cents per barrel at the wellhead would, in my judgment, jeopardize the Nation's security and it would deal a striking blow to the petroleum industry-particularly to the small operator. At first glance, importing low-cost petroleum may appear to be attractive, but over the long haul it would put our Nation in a vulnerable position. The experience of 1967 and 1956 is that foreign oil will be inexpensive only as long as we are not dependent upon it for our needs and security. Indeed, there are strong grounds to believe our reliance on foreign oil is already too great. Imports of crude oil and refined products now equal more than one-third of total U.S. production. Seventeen Eastern States are now dependent on foreign petroleum sources for 46-365-70--2 40 percent of their requirements. A loss of this supply would result in critical shortages in a vital, national, industrial area. We also need to survey our balance of trade position before making any changes which would increase the importation of foreign oil. Already oil imports constitute the largest commodity deficit item in our balance of trade, totaling $2.6 billion annually. To increase the import level would only aggravate our balance-of-payments difficulties. I believe it cannot be emphasized too strongly that the Nation's security will be dangerously impaired if the level of imports is increased. The present uncertain conditions in Libya and the Middle East should remind us today of this sword hanging over our heads. In addition, increased imports would bring about serious economic problems for the areas in which petroleum production plays a significant role. The consequences of a 30 to 80 cents per barrel enforced cut in the price of domestic crude would be debilitating in many areas and disastrous in others. A field study by the Oil and Gas Journal showed such a step would likely result in the eventual monopolization of the industry by squeezing out independent producers. Two hundred and thirty thousand stripper wells producing 1.3 million barrels per day would have to be plugged in the States of Texas, Louisiana, California, Oklahoma, and Kansas. Exploration for oil and natural gas would be cut by as much as 50 percent as risk capital leaves the oil industry for other areas paying greater rates of return. Furthermore, the study showed that the greatest impact of an enforced price cut would be borne by the producing and exploration segments of the industry As you know, these are generally the small operators and independents. Small refiners would also find their positions jeopardized as their sources of crude shut down, and they would be put at a disadvantage with large coastal refiners. The consequences would be worse if the cut were greater. The Independent Petroleum Association of America estimates that a $0.50 reduction in crude oil prices per barrel would result in a loss of income on U.S. production of $1.68 billion per year. This would be two-thirds of the $2.5 billion spent on U.S. exploration in 1963. I am especially concerned about the impact an enforced cut in petroleum prices would have upon my district: 21 of the 23 counties in Wyoming have oil or gas production-6,788 persons are directly engaged in crude oil and natural gas production and additional thousands have related jobs. Petroleum accounts for 75.5 percent of the mineral industry's output which is the largest industry in Wyoming. Alone, the petroleum industry is the biggest in the State. At the present time 37 percent of the State's total taxable valuation is dependent upon oil and gas production-one-third of Wyoming's total income for education and other government services. In light of the above figures, I cannot overemphasize the disastrous effect enforced price cuts would have on the economy of Wyoming. Cuts in exploration and production would severely cripple producers. Thousands of petroleum employees would face the threat of losing their jobs. The resultant decrease in tax revenues would cause havoc in our State's educational system. The decrease would probably result in increased levies on the balance of our economic base-something other industries and our citizens can ill afford. It is doubtful that tax increases in other areas could even begin to compensate for such a loss. Our citizens would be forced to face a reduction in the basic services that State and local governments provide. These then, are the reasons for my concern and, in my judgment, are compelling reasons for continuation of the quota system. I join the Chairman of this subcommittee in a very real concern for the oil industry which, of course, can be profoundly affected by any proposed changes in our oil import policy. I have made a number of speeches on the floor of the House with respect to this, but coming from an oil-producing State, I am not only concerned about the national security aspect and balance of payments, but I am also very much concerned about the effect on the economy of States such as Wyoming. I am also concerned about the implications of any change in our oil import policy with respect to the consumers, because we are all very much concerned about giving them the best break possible. There are some very debatable conclusions, it seems to me, that have been drawn by the President's task force and I particularly welcome the proposals of the President to set up a further study committee, and his invitation for hearings of this sort, I think, are in the national interest and I am looking forward to the development of the testimony that we can have publicly here in the course of these hearings. Thank you. Mr. EDMONDSON. General Lincoln, do you want to take the stand, please, sir. STATEMENT OF HON. GEORGE A. LINCOLN, DIRECTOR, OFFICE OF EMERGENCY PREPAREDNESS; ACCOMPANIED BY DUDLEY CHAPMAN, SPECIAL ASSISTANT, AND JOSEPH LERNER, NATIONAL RESOURCES ANALYSIS CENTER Mr. LINCOLN. Mr. Chairman, other distinguished members of the committee. I am George A. Lincoln, director of the Office of Emergency Preparedness of the Executive Office of the President. I want to say at the beginning that it is an honor to be asked to appear before you today to start your hearings on this very difficult subject. I suppose I am here in a dual role, both as a member of the President's Cabinet Task Force on Oil Import Control and as newly designated chairman of the President's Oil Policy Committee. The President did on February 20 give the Director of the Office. of Emergency Preparedness the responsibilities for policy direction, for coordination, and, of course, surveillance of the oil import program, acting with the advice of a permanent Oil Policy Committee. Now, I have with me a copy of the President's statement of February 20 which had attached to it a summary of the report which has just been mentioned, and with your permission, sir, I will present it for the record. |