creasing at a current rate of 18 to 36 percent per yead. The sad thing about this situation is that the primary recovery mechanisms only produce about 10 or 20 percent of original oil in place in the reservoir. Even after water flooding there is still about 65 percent of this original oil left or tertiary recovery of these wells can be saved. Thank you. Senator DOLE. I thank you very much. Again, that's the kind of information we need. If you do not have copies, we can make copies of that statement. Thank you.

Neil Tischauser from Salina. This is our last scheduled witness. As I said, we have a little time, so if some of you would like to express yourselves, there's a mike right in the middle, just give your name and address so we know where to send a copy of the hearing record and we can stick around awhile. Neil, go ahead.

STATEMENT OF NEIL TISCHHAUSER, SALINA, KANS.

Mr. TISCHHAUSER. Hon. Senator Dole, my name is Neil Tischhauser. I am from Salina, Kans. I run a few cattle, farm a little ground and have a little working interest in a few wells.

Two years ago the President opened the imports and dropped the price of beef 13 cents a pound in 2 days. In January he put the embargo on the grain and we already know what that did.

I would like the opportunity-I'd like to thank you for the opportunity to relate the feelings of my family and friends on the windfall profit tax.

We are told there is an energy shortage but is this really true? U.S. gasoline stocks stand at 259.6 million barrels, 12 million barrels more than in 1977 when there was no crisis. Crude oil stocks are 305.3 million barrels, 32.7 million barrels more than 2 years ago. Demand for gas has risen only a tiny 0.3 percent since 1977. Including the strategic reserve and all above ground stocks, we have 1.3 billion barrels in reserve, 22 percent more than in March 1977.

We, the American people, are being penalized by our own Government for finding new domestic oil. It looks like our Government would rather wreck the American economy by importing 7.7 million barrels of foreign oil a day than to see their innovative American people again bring this once great Nation back to a great self-sufficient nation. Going into the oil business is a very high risk business. This alone is enough to stop most people from investing. Add a high tax and you also stop the people who would have invested in finding new oil. The average oil well in Kansas and Oklahoma produces only about 10 barrels of oil a day. When that well stops pumping, and they do run dry after a time, you lose your income and your investment forever.

History will show you that the price of oil had to go up to make these wells feasible. Now the Government, with their windfall profit tax, are making the small wells nonfeasible again. I, for one, am not about to invest more money in a business that the bungling elected officials in Washington, D.C., have turned into a loss.

I would like to close by stating that if you want more domestic oil, then give us the chance of finding it with a reasonable chance of making a good profit in a high risk business. We would like to see the windfall profit tax dropped. Since the large oil companies can recover

their taxes with higher gas prices, we would like to know how we, the working interest and royalty interest owners, can recover our tax losses. Thank you.

Senator DOLE. Thank you, Neil. Thank you very much. You're making a point that was lost on many in the Congress. There is no way you can recover your costs; it's taken out of your check. Now you know how much was taken out. It's the same thing that Senator Boren said earlier. It's a transfer of money from this region to the Federal Government. It's money that's not being spent in this area, jobs that are not being created in your area. We understand the necessity for taxation in this country, but it's not a profit tax and it was never a profit tax. It is an excise or severance tax-call it what you will. There is no way the royalty owner or the independent producer can pass on the cost. The tax affects particularly someone in your generation, which is well below average age of farmers in the State. The average Kansas farmer is well into his fifties. We are making it more and more difficult for anyone under this age to get into agriculture. Thank you very much. Mr. Ehrlich.

STATEMENT OF HON. ROY EHRLICH, STATE REPRESENTATIVE

Representative EHRLICH. Thank you very much, Senator Dole. I do want to say that the news media throughout our Nation indicated that you and Senator Boren carried the weight for the oil-producing States and I want to congratulate you on this.

Barton County, which I do represent as State representative, the 112th District, is one of the largest oil-producing counties within the State.

I definitely concur with every statement that was made in the testimony here today. I support Senate bill 2521. I feel that even if you are not a royalty producer or receiving royalty interest, this is going to be revenue lost to the State of Kansas and also to our county and to our cities.

I have come with a petition and it is signed by many of the royalty owners in the northern part of Barton County. In fact, Senator Dole, some of them even said, tell Bob "hi," so if you go through these, I'm sure you'll recognize the names. One of the farmers indicated the wheat prices are down, cattle prices are down. This legislation has hurt the farmer, the independent operator, and also the businessmen within the State of Kansas.

One person that handed me the petition indicated to me saying that on this, first of all, they take my cattle at low prices, wheat at a low price, now you want to go 42,000 feet below my property to get that. Thank you very much.

Senator DOLE. I know you, but they need to have your full name and address.

STATEMENT OF ED FELLERS, HAYS, KANS.

Mr. FELLERS. Senator Dole, I just wanted to add something that I don't think has been touched on today. I have a friend who started investing in drilling of wells 8 years ago. The other day he authorized his accountant to figure up how much money he had put in, in the

8 years time, how much he had gotten back, and the accountant found out that over that 8-year period that he was $32,000 in the hole and he also projected that it would take him possibly 7 or 8 years to get this $32,000 back before he would ever have any money that he could call his own.

I just wanted to comment on that.

Senator DOLE. I appreciate that. We want to get your address and name so we can send you a copy of the record.

STATEMENT OF BILL BROWN, CHENEY, KANS.

Mr. BROWN. Senator Dole, your staff has a copy of this letter already. I just want to make a short statement-30 seconds. My name is Bill Brown. I own a producing oil well, Brown No. 1, in Kingman County, and I own all of it and it was drilled in 1950. The well is certified as a stripper well and produced 2.25 barrels of oil per day. In addition to owning this well, I own the land on which the well is situated and thus own the royalty. The purchaser of this well has withheld windfall profit tax in the amount of 60 percent of production over and above the base price. Apparently the windfall profit tax law is so confusing that the purchasers are withholding the maximum amount of tax hoping at some future time to make an adjustment. As I understand the law, I should be taxed at 30 percent on the working interest and 60 percent on the royalty interest. Currently I have been underpaid approximately $1,000, which is a considerable amount of money to me. The most unfair expense of this tax is not the confusion of amendments in it but the fact that I will ultimately lose 30 percent of 78ths and 60 perecnt of /gth of the production without any way of recovering this loss.

I think it is totally unfair for me to be placed next to the major oil companies who ultimately recover at least in part their tax loss. This law as now written is another perfect example of how the little guy bears the biggest burden and the big guy bears the littlest burden. Someday, somehow, Congress should open its eyes and make purple homage to the other guy.

Senator DOLE. Thank you very much. We need to examine that and see if there's something we can do to help you on that.

Mr. BROWN. I've got four letters into Permian Oil Co. in Houston and they haven't answered one of them. I'm sure I'm an independent, not a major on one little well.

STATEMENT OF LEO HAWLEY, ZENDA, KANS.

Mr. HAWLEY. Leo Hawley, Zenda, Kans. I'd like to address the part of the rollback prices. As you know, last year all Federal income tax was paid on about the same price. Now when they take it off the top, it doesn't run through the economy, and as has been previously stated, it turns over five times in the State of Oklahoma. Say it turns over two more times before it goes through the economy but you take $100 and go through it, you find out they take $60 out for the windfall profit. tax. Now, that $60 when turned over 7 times in the economy, it would be $420. Now, if the Federal Government got a tax cut of that, say 20 percent, that's $84 Actually Uncle Sam is actually cheating himself out of $24 that's going to have to be made up some way and I don't

particularly want to have to pick up that difference when they get through sending it through, that's $200-some billion and they find out they don't have that much.

Senator DOLE. I appreciate that. I think it does make a point. As you indicated, the tax comes off the top. I guess the theory is the Government does not want to take any chances, whether it turns over seven times or not.

STATEMENT OF GEORGE C. McKOWN, GREAT BEND, KANS.

Mr. McKown. My name is George McKown, Great Bend, Kans. I'm president of DaMac Drilling Co., a drilling contracting firm here. We're also a small independent oil producer, also own farmland and we have some royalty in an oil well on our farmland and, therefore, have a small royalty interest. In the remarks that were made today, I heard a few things that I think need to be addressed. One is, Senator Dole, you mentioned the fact you have some idea where the additional revenue could come from to replace the revenue that the royalty owners are presently paying. I have some ideas also. I also heard the remark that the royalty owners should be treated as good as the producers. I would suggest the royalty owners should all be treated the same. What I'm thinking of is the biggest royalty owner of all, which is the Federal Government. Our big royalty owners, the Federal Government who gets billions of dollars of royalty, we have the State government which get a tremendous amount of money, particularly the coastal States which have the right to offshore oil for so many miles off the coast. In some cases we have school lands which get a certain amount of royalty income.

We have also got cities, such as Long Beach, Calif., that get a tremendous oil income. Now, the thing is this so-called windfall profit tax has a complete exemption for oil production which belongs to any unit of government and therefore the people I've met are not paying any of this windfall profit tax that the small royalty owners are paying. I think this is totally wrong that the exemption for government owned oil by any branch of government should be repealed as a way of making up for perhaps loss of revenue which could be lost by giving exemptions to the small royalty owners.

Another thing about the problem of the exemption of government owned royalty is it tends to put all the private interest to considerable disadvantage. Most people don't realize that the highest price oil in the world today comes from the U.S. Government in Elk Hills, Calif. They are required by law of the Federal Government to sell it to the highest bidder and it sells for $42 a barrel and that's higher than the Arab nations or OPEC is charging and our own Government is charging us the highest price for crude oil of any oil consumed in the United States. We have situations where units of government have actually organized oil companies. I'm thinking particularly about the one in Long Beach, Calif. In that situation the city of Long Beach has an oil company of its own which is exempt from this tax. Now, there are many of us who are concerned about the possibility of national oil companies. I'm simply pointing out we already have a situation built into this law which gives that type of a company an advantage over private companies.

In some of the States there are a lot that want to organize their own State oil company and be exempt from this tax. They would have an economic advantage over the private oil companies which might have drilled the same land.

Senator DOLE. We need to get your address up here. I appreciate that. They did have a big debate over whether the Federal Government does pay a tax on the oil it produces. States are exempt. That issue provoked considerable controversy during the windfall profit tax debate. Your statement points out some areas that should be addressed and we're happy to have that testimony.

STATEMENT OF CHARLES R. MILLER, HOISINGTON, KANS.

Mr. MILLER. Charles R. Miller, Hoisington, Kans., 67544, 1205 N. Clay. Senator, I can't help but make some observations. First I want to try and reinforce the cost of oil production that royalty owners have, overriding in most cases, and I've invested in the oil business in several different ways and I was counting up on my fingers and my ratio of success and failures is about 5 failures to 1. Now, that's better than an example that was revealed earlier, but in this windfall profit tax there's no consideration given to royalty holders or anyone else as far as I know for total investment in the oil industry.

Now, the Congress perhaps has failed to realize in their consideration of this bill that big business or business and industry do not pay taxes, they only collect taxes. Now, on that basis then there's only two categories of people who pay these taxes, that's the royalty owners and the public at large, the consumer.

I would hope that you return to Washington and try to impress the Congress with that fact and that fact being so then the 2521 certainly is not an adequate remedial measure. The facts indicate that this should be repealed in total.

Senator DOLE. I agree with that, Charlie, but at the same time I have to be realistic. We tried to send the whole tax bill back to committee to do that and we got 35 votes out of 100. That's not enough. Now, there's a lot of things we can do. Maybe there will be some new Senators around next year. I know that one candidate for President has indicated he is against the tax. Maybe that will help, but beyond that we must face a political reality, as Senator Boren pointed out. Unfortunately too many in the Congress forgot about the energy aspects of the windfall tax. It became a big revenue bill-an exercise in how much money can we get. We've got about eight witnesses backed up behind you.

Mr. MILLER. I have one more point here. First, through this method of taxation it's my opinion that this is one giant step toward nationalization of the oil industry via taxation.

Senator DOLE. That point has been made.

Mr. MILLER. Now, this is not in jest, but perhaps the two greatest injustices that have ever been perpetrated in our country, the last two of the greatest, and that is this windfall profit tax was enacted and that is probably second to the inauguration of our President. Thank

you.

Senator DOLE. Thank you, Charlie, I appreciate it.