CHECK MO.

70015303

LEASE NUMBER

60000203120 60000203120 60000203120

KERR MCGEE CORPORATION KERR MCGEE CENTER OKLAHOMA CITY, OKLAHOMA 73125

CHECK NO.

70015302

LEASE NUMBER

60000203400

60000203400 60000203400

135233

OWNER NO.

WHEN WRITING REFER
TO LEASE NUMBER &
YOUR OWNER NO.

KERR-MCGEE CORPORATION KERR MCGEE CENTER OKLAHOMA CITY, OKLAHOMA 73125

Mr. WATKINS. These people cannot in any way be considered as engaging in profiteering or plundering, and I ask how can this administration or any administration and the Congress justify taxing them at the same rate as the major oil companies is beyond my comprehension.

Since this tax bill passed I have received phone calls and letters from constituents who were outraged and justifiably so. Probably less than 1 percent of those royalty owners knew the windfall profit tax included them when that legislation was being debated in Congress.

Their first inkling that they were the victims of the largest tax ever levied was when their royalty checks came last month with a note explaining why those checks were smaller.

Understandably they are not going to be too excited about allowing another well to be drilled on their property in the future. To that extent, as you know, this tax is going to further reduce further production which is a must for the national security of our country.

Mr. Chairman, you and Senator Dole and I and others have fought at every turn to prevent the windfall profit tax from passing.

Unfortunately, we didn't have the votes. But if every royalty owner and independent producer would let their elected representative know how this tax has affected them across this great Nation, our legislation, your legislation would right these injustices and we would pass this legislation we are presenting today.

I thank you for allowing me to come here and represent many of the people that I represent throughout the Third Congressional District and throughout Oklahoma.

Mr. BOREN. Thank you very much.

Senator DOLE. Wes, we greatly appreciate your help. I think your being first on the list indicates your interest in the House and your leadership, and we appreciate it.

Again, it is a demonstration-it is a bipartisan effort to right a wrong that has been imposed on a lot of people who didn't even understand, as you indicate, they were going to have a tax to pay. So we just have to keep working.

Thank you.

Mr. WATKINS. Thank you.

I thank you and Senator Boren again.

Mr. BOREN. Let me ask you one question. You mentioned the fact that this will result in-passage of the tax will result in a decrease in energy production-will discourage energy production in this

country.

Isn't it true that-and we are particularly focusing now on the royalty owner-if the royalty owners try to keep up their current income, No. 1, with a tax this heavy they are going to be more and more reluctant to be able to lease their property; and if they do lease it, they are going to have to request higher and higher fees in order to just have the same income after taxes. So this might make it hard for some independent producers and so on to enter into leases so the overall effect on the rovalty owner of this tax will also result in decreased production, will it not?

Mr. WATKINS. That is very true, sir.

As you well know many of the royalty owners that have property are in this room. They are out a lot of expense because of the various

difficulties. They are going to find that they don't have enough money to maintain fences and do other things-keep pastures-and many other things.

You know, I think it is unfortunate-and I have said this so many times-maybe you two gentlemen agree with me, many of our colleagues in the halls of Congress think that royalty only applies to many of the people in Britain.

That is the interpretation they have. They don't realize we are talking about people who have been widowed or otherwise.

I thank you for showing up. I think this is great testimony with all you people filling this audience and coming and giving your personal testimony in behalf of this legislation and trying to right this wrong.

I want to commend Senator Boren not only-and Senator Dole, but all these people who have driven many hundreds of miles coming here to give their personal testimony.

Mr. BOREN. Thank you very much.

I might mention that I do apologize to those who are having to stand. We have brought in a few folding chairs. I am told that there are almost 1,400 seats in this auditorium. They are all virtually full and with quite a few others standing.

Again as the Congressman said I think that indicates that there is great interest in it; and as Senator Dole said, "We don't have apathy here."

We do apologize to those of you who are having to stand.

Mr. DOLE. There are a few seats down front-about 20 seats down here.

Mr. BOREN. Fifteen or twenty-if any of you want to move forward and see if you can find a seat down this way. There are a few seats over here that are reserved for witnesses that are not all full if some of you want to. There are about 10 seats down here. [The prepared statement of Mr. Watkins follows:]

TESTIMONY OF HON. WES WATKINS, MEMBER OF CONGRESS,
THIRD DISTRICT, OKLAHOMA

Thank you, Mr. Chairman and Senator Dole, for this opporunity to testify on the so-called "Windfall Profits Tax" and your legislation, S. 2521, which would exempt the first 10 barrels per day of royalty production from the tax. I wholeheartedly support this bill and have introduced similar legislation in the House, H.R. 7300. Our bills have the same intent-to provide relief for royalty owners from the Windfall Profits Tax-but the mechanics differ slightly. My bill, which now has about 15 co-sponsors, would provide total exemption from the tax for those royalty owners who owned the mineral rights at the time the well lease was executed. Also, it goes a step further in providing relief to the small, independent oil producer by exempting the first 1,000 barrels per day of production from the tax.

I am sure many of our colleagues in the House and Senate voted for the Windfall Profits Tax with the impression they were striking a blow against the big, major oil companies. Unfortunately, while pinching the "big boys," they slapped the little folks the royalty owners and small, independent producers. The letters I have received from constituents in the past few weeks best demonstrate the devastating effect this tax has had on the typical royalty owners-farmers, ranchers and retirees, many widowed, who are living on meager Social Security benefits and small monthly royalty checks. Here are just a few examples:

A lady from Marlow, who writes: "I am a widow and a Senior citizen trying to supplement my Social Security with my royalty checks . . . I

cannot understand why we should be taxed at the same rate as the major oil companies."

A gentleman from Holdenville, who writes: "I am 80 years old and have four acres royalty . . . I own my farm, but (I) am not able to farm it. (I) just have my Social Security. I was getting $25 per month. As you can see by the deposit slips, they are taking about all of it."

A couple from Elmore City, who write: "We can take you to many homes in this small town, where many times only one mate is left, and where although the check may be small, to them it means a few more groceries or medicine."

A retired couple in Ardmore, who, in their younger years, struggled, saved and borrowed money to purchase mineral rights as a source of supplemental income for their old age. "They are simply taking bread off our table and very badly needed medicine off our shelves, and this actually puts us on the bottom rung of the ladder financially," the couple said.

A couple from Hugo, who write: "We are both past 65, living on a fixed income, (and) we get a royalty check each month. This past month the gross amount was $77, from which $34 was withheld for the Windfall Profits Tax. That amount would have made a payment on a kitchen range, which we desperately need."

A 76-year-old widow in Cyril who lives on a Social Security check of $276 plus her royalty income on one small stripper well. This tax took over $100 from her March income.

A lady from Wetumka, who writes: "I am one of the so-called 'victims' of this (tax), a widow, receiving a moderate Social Security check. The royalty check I received each month helped some in trying to keep up with infation."

A 71-year-old lady in Duncan whose monthly income was $228, plus a royalty check of about $100. Last month her royalty income dropped $30 because of the tax. In addition to her regular living expenses, each year she pays $114 for homeowners insurance, $54.69 for two Medicare supplemental policies, and $16.90 for two cancer policies. She also owes a $628 carpenter bill and needs new eyeglasses. She says, "With the increase in the royalty check I was beginning to get ahead, but with this tax taken out of my check . . . I'm back in the red and it really hurts."

A retired gentleman in Walters who used the royalty check to supplement his Social Security, now finds himself turning to welfare and other means to keep his wife in a nursing home.

These are just a few of the vivid examples of how this tax has pulled the rug from under our older citizens who had been depending on their royalty income to help bail them out of inflation. Mr. Chairman, at this time I would like to submit these and other letters in their entirety for the record.

These people cannot in any way be considered engaged in profiteering or plundering. How can Congress justify taxing them at the same rate as major oil companies?

Since this tax bill passed, I have received phone calls and letters from constituents who were outraged--and justifiably so. Probably less than one percent of the royalty owners knew the Windfall Profits Tax included them when that legislation was being debated in Congress. Their first inkling that they were the victims of the largest tax ever levied was when their royalty checks came last month with a note explaining why the check was smaller. Understandably, they are not going to be too excited about allowing another well to be drilled on their property in the future. To that extent, this tax is going to further reduce future production.

Mr. Chairman, vou, Senator Dole and I fought hard at every turn to prevent the Windfall Profits Tax from passing. Unfortunately, we didn't have the votes. But if every royalty owner and independent producer would let their elected representatives know how this tax has affected them, our legislation to right these injustices would pass.

Senator BOREN. The next witness is a member of the Oklahoma State Senate. He is a very distinguished member of that body, and we are very glad to have him with us this morning. State Senator Robert Miller will be our next witness.

STATEMENT OF HON. ROBERT MILLER, STATE SENATOR,
STATE OF OKLAHOMA

I am Bob Miller from district 8 over in eastern Oklahoma. I represent Okmulgee, McIntosh, Muskogee, and Haskell Counties.

Thank you for allowing me to testify on behalf of the royalty owners and independent small producers in my area.

As you know, Oklahoma ranks fifth in oil production in the United States. This points up the significant impact that will be felt in OklaLoma. The imposition of this tax is discriminatory to the people in the State and particularly my area.

It is my opinion that confiscation of their royalty owners property will have a long-range adverse effect on the overall economy of Oklahoma as well as on all the States of the Union.

Many of those who receive the royalty checks are elderly people on fixed incomes. For many the small checks that come from the oil producers it is their primary source of income.

To have this check literally slashed by as much as 30 to 60 percent is disasterous.

I applaud Senator Dole and Boren for their efforts to exempt the small royalty owners from this unfair tax. I am hopeful that these hearings throughout the States will have such an impact on the remainder of Congress that they will take a second look at this tax and take remedies to revise and ease the burden of it.

The continued imposition of this tax on Oklahoma will drain Oklahoma of millions of dollars of valuable revenue and will further hurt the consumer through higher fuel cost.

This truly is the worst intrusion of the Federal Government in the free enterprise in the history of this Nation, and it makes the petroleum industry the scapegoat for the country's energy problem.

The really sad part of the entire matter is that the people who are most severly taxed are those who can least afford it and can in no way make up their loss.

This particular form of tax is not only unfair to the royalty owners, but will lessen his desire to lease his land for drilling purposes.

While this hearing is primarily directed to the royalty owner, the tax has also adversely affected the small independent lease producer and his plans for continuing exploration.

I would like to give you the following examples of drilling plans of a few people in my area. One man who planned to drill 15 wells in 1980 has reduced this to three-merely whole leases.

Another man who planned 68 wells in 1980 has reduced this down to 10 for the same reason.

Another man planned to drill 50 wells and will now drill 5. Another planned to drill 25 and will not drill any.

An independent who planned to drill 10 will drill 1. Another who planned 15 will drill 1 and another man who planned 2 will drill none. These examples show that this particular legislation will reduce the number of wells drilled in a very small area in Oklahoma.

Most of these are stripper wells, but nevertheless you can see it will have a detrimental effect on the energy sector of this country.

Of course I would like to see the entire piece of legislation repealed, but as an alternative the least we could do is allow a 25-barrel exemp