Recent studies show that the production of petroleum in California is excessive, relative to the source of supply, and that the industry has expanded its markets without regard to reasonable conservation. A large percentage of the State's refined petroleum products is shipped abroad, an enormous proportion of which is going to establish emergency war supplies for foreign nations. To one nation alone nearly 30,000,000 barrels of crude and refined products were shipped by the California oil industry during 1937; this quantity constituted nearly the entire shipment of the United States to that country and, furthermore, constituted over 40 percent of the excess production of the State. This flow of petroleum products has continued in increasing volume during the current year.

During the past 9 years the State's reserves have been depleted by nearly 20 percent, due primarily to withdrawals in excess of actual normal needs, whereas the reserves of the Nation outside of California have shown a very pronounced increase. When this state of affairs is considered, it becomes a matter of extreme importance in connection with the national defense that the oil reserves in this area should be built up rather than seriously and irreparably depleted.

The Navy Department is powerless to act in the premises until there is authorizing legislation passed by the Congress. Before the issue between those claiming adverse rights in these petroleum deposits and the Government may be settled by the courts, there must be asserted in behalf of all the people of the United States their right to conserve the oil therein for national need. Under the Constitution the authority for such an assertion of claim of right or declaration of policy in behalf of the people is lodged exclusively in the Congress. Neither the executive nor the judicial branches of our Government may legally or properly assert such right, declare such policy or take authoritative action in the premises in the absence of a positive pronouncement by the Congress.

It is the opinion of the Navy Department that if the proposed joint resolution is enacted into law it will provide the means by which exploitation will be stopped and prevented, and the petroleum deposits underlying submerged lands adjacent to and along the coast of the State of California will be conserved for the future use of the Navy in line with the well-established policy of maintaining a naval petroleum reserve in the ground. Such legislation would be in the interest of national defense. The Navy Department recommends that the proposed joint resolution be enacted, that is, H. J. Res. 176.

The proposed joint resolution is in accord with the program of the President. Sincerely yours,

CHARLES EDISON, Acting.

The national defense of the United States, like that of every other modern nation, is dependent on an adequate supply of raw materials from which motor fuels, fuel oils, lubricants, and other hydrocarbon products can be manufactured.

Crude petroleum in natural reservoirs is the only raw material in the United States from which it is commercially feasible and physically practical to manufacture the products needed at the present time. Insurance of a competent supply of crude petroleum to meet anticipated extraodinary demands for the national defense is, therefore, essential and imperative.

The reserves of crude petroleum in the United States fall into two classes: (1) The industrial reserves, and (2) the governmental reThe known industrial reserves at present are estimated to be approximately 17,000,000,000 barrels, or about 14 years' supply. The known governmental reserves at present are estimated to be anywhere from 700,000,000 barrels to 300,000,000 barrels.

The Government can, of course, put its trust in the industry to supply the requirements for national defense in time of war as well as in time of peace. But no one knows when the industry may be unable to discover and develop reservoirs of crude petroleum as fast as it depletes them. Moreover, the industry is at all times not only

141082-39-ser. 2- -3

producing and manufacturing petroleum products for domestic consumption but also exports to foreign countries more than it imports. It would therefore seem to be an unwise policy to place entire dependence for the conservation of petroleum for national defense on the industry alone.

The last war gives an example of the folly of depending entirely on industry for reserves. Although the industry found it profitable to supply petroleum to the warring nations and to manage to pull through successfully, at the end of the war stocks of petroleum were depleted the world over and there impended a serious shortage. This was a 4-year war, not nearly so mechanized as the next one is likely to be. It is doubt ful if the oil companies could have met the petroleum demands of a fifth year in the last war.

But the most serious aspect of this problem of petroleum reserves for the national defense lies in the fact that more than 87 percent of the known industrial reserves lie east of the Rocky Mountains. Less than 13 percent of the total industrial reserves are on the Pacific coast, and all of these are in a comparatively small area in southern California. Any prolonged conflict in the Pacific area would soon draw heavily on the California oil supply, and it is extremely doubtful if the demands for naval and military needs in addition to industrial requirements could be met adequately over a period of years. No pipe lines extend from the midcontinent fields to the Pacific coast, and to depend on ardous shipments from the midcontinent to the Pacific coast via the Panama Canal would be trusting much to chance. No satisfactory substitute fuels, such as good coal and oil shales, are available on the Pacific coast, and the situation is obviously a serious one.

The Government cannot depend on the industry in California to conserve any significant amount of oil for the national defense. The commercial interests of that industry are concerned primarily with profits, immediate and sustained. The industry exports from California huge quantities of petroleum and products to potential enemies and will continue to do so as long as law and profits permit. They import no petroleum or products.

From time to time the industry attempts to control or to limit production in the name of conservation, but such control outside the possibility of indeterminable and insignificant amounts neither increase the ultimate yield of oil nor extends the time of use thereof.

The only solution for increasing the governmental reserves and for effectively conserving petroleum for the national defense where it is most needed, therefore, lies in the acquisition of additional petroleum lands by the Government. Such lands are available on the Pacific coast where anywhere from 300,000,000 to 1,000,000,000 barrels of oil are estimated to lie in the submerged lands off the coast of southern California. Ownership of these deposits has never been established. The State of California has assumed possession and has permitted operators to drill wells into these rich deposits and to extract oil already in excess of 100,000,000 barels while wells adjacent to these submerged laids have drained from them at least 25,000,000 barrels of oil.

Leaders of certain companies, while advocating curtailment of production in the name of conservation elsewhere, are at the same time

engaged in drilling into and draining oil from these submerged lands, ownership to which the Federal Goverment seeks to have established. The Federal Government has no desire to obtain property belonging rightfully to others, but it feels that where ownership has not been determined, and especially where the necessity for enhancing its petroleum reserves is so urgent and important, it is its duty to protect the public interest and the national welfare.

The State of California will benefit ultimately as much, if not more, than anyone else by enlargement and preservation of the naval petroleum reserves for the national defense, and could wisely afford to support rather than to hinder this undertaking.

In connection with any discussion of the California tide and submerged lands situation it is necesary to mention the fact that only recently the State and the municipality of Long Beach have authorized the drilling of 177 wells to be slanted from uplands locations seaward to tap the submerged lands extensions of the Huntington Beach and the Wilmington oil fields. When these wells have been drilled, a total of more than 800 oil wells located on tide lands, on adjacent uplands, and on piers extending from the shore into the submerged lands, will be producing all or part of their oil by draining lands which would be affected by the proposed legislation.

The total known oil reserves of the United States as of January 1, 1939, are estimated to be about 14,350,000,000 barrels or a little less than 12 years' supply at the 1938 rate of production-1,200,000,000 barrels. The American Petroleum Institute gives a figure of 17,348,000,000, or about 14 years' supply. It is evident then that even though demand for our oil does not increase in the future new discoveries aggregating approximately 1,200,000,000 barrels yearly must be made unless this comparatively small backlog of unproduced oil in known fields is going to be called upon to furnish part of our needs. In 1938, 27,149 wells were drilled for oil and gas of which number 19,121 produced oil, 1,985 produced gas, and 6,043 were unproductive. Of the 19,121 oil wells drilled in 1938 but 115 represented wells which discovered new fields adding to our domestic supply and 18,996 were drilled in connection with the further development of known oil fields. On January 1, 1939, the average oil well in the United States was producing at the rate of 9.16 barrels daily, the 359,045 producing wells having a daily production of a little less than 3,300,000 barrels. The United States produces and consumes approximately 65 percent of world oil production and 15 percent of the remaining 35 percent is produced in South America and Mexico in areas which in time of war would be dominated by a strong United States Navy.

Six new oil fields were discovered in California during 1938 having an estimated proven area of 910 acres and an estimated recoverable oil content of 41,500,000 barrels; extensions to known fields and discoveries of deeper sands in oil fields added another 3,910 acres and 126,500,000 barrels to California's oil reserves bringing the total acreage of new discoveries and extensions to 4,820 acres having an estimated recoverable oil content of 168,000,000 barrels or 80,559,000 barrels less than the 248,559,000 barrels produced from California oil fields during the year. It is interesting to note that while producing 80,559,000 barrels more than the estimated content of new discoveries made during 1938, California oil operators exported 26,459,544 barrels of crude oil and 37,406,316 barrels of refined petroleum products

to foreign markets, principally to the Orient, where most of it went to carry on warfare and to augment storage for military naval operations of the warring nations. It has also been stated that this oil was exported at little or no profit to its producers who were glad to dispose of it at cost or less to save the expense of storage above ground where stocks increased more than 30,000,000 barrels during the year threatening to bring about a break in the domestic market prices for both crude oil and its refined products. These figures indicate that had California production, been restrained to domestic demand for crude oil the State's oil reserves would have shown an increase of nearly 24,000,000 barrels instead of a decrease of more than 80,500,000 during the year 1938.

The importance of oil and gas reserves in a region barren of other cheap natural fuels cannot be too strongly stressed. The importance of California oil in connection with the State's commerce and industry, as well as for the maintenance of the Pacific Fleet, makes it essential that the oil resources of California be made to last as long as possible. Their conservation is deemed by the Navy Department to be one of the paramount items connected with the defense of the country's western border, Alaska and its Pacific Ocean island possessions and territories.

Assuming that the oil from naval petroleum reserves Nos. 1 and 3, the only true oil reserves we now have, will be efficiently utilized when produced and that all of the more valuable products of the oil will be extracted by refining before the residue is available fuel for ships, it is probable that the naval petroleum reserves actually represent a backlog of less than 20 years' peace supply for our future Navy. This is not believed to be an adequate fuel reserve, and it must be added to if it is at all possible to do so.

The National Resources Committee in its recent report to the President heartily endorsed this general proposition.

In certain of the areas affected by this proposed legislation great confusion over land titles has resulted in the loss of huge sums to the Nation, State, or municipality, whoever may eventually be determined to be the owner of these deposits; private interests have taken advantage of this situation, and it is of very great importance that this question be decided as soon as possible.

Your committee will probably be told that this oil cannot be protected from drainage; perhaps some of it cannot, but the argument is beside the point. If the oil belongs to the Federal Government, this problem is one for the Government to solve. The same defeatist argument was used as an excuse in the Elk Hills and Teapot Dome cases, and I am sure that we do not wish a repetition of that scandal,

Other more or less plausible arguments, chiefly of a legal nature, may be advanced against this proposition, but I repeat that we do not covet the property of anyone, whether State, municipality, corporation, or individual, but we do believe that the Government should assert its rights and leave to the courts to decide the issue of ownership. It is needless to say that we represent only the Government and have no commitments to anyone. If anyone has any superior right, title, or interest in the premises, he is fully protected under the terms of the proposed bill, H. J. Res. 176.

I have not touched upon the legal aspects of this case, and, to my mind, the question is almost entirely a legal one, but Mr. McNemar,

of the staff of the Judge Advocate General of the Navy, is present, and he will be very glad to present this phase of the matter if the committee so desires.

Mr. WALTER. If Mr. McNemar is present, we shall be glad to hear him at this time.

STATEMENT OF LESLIE C. McNEMAR, SENIOR ATTORNEY, OFFICE OF THE JUDGE ADVOCATE GENERAL, UNITED STATES NAVY

Mr. WALTER. Mr. McNemar, what position do you hold?

Mr. MCNEMAR. I am a senior attorney in the office of the Judge Advocate General of the Navy.

Mr. Chairman and gentlemen of the committee:

We concur in what Judge Hobbs has said before this committee this morning. As a matter of fact, much of what he has said has been covered before in the hearings, the previous hearings before this committee. We do not care to reiterate the statements which the judge has made, for we do not feel we would be warranted in taking up the time of the committee to that extent.

There is one apparent proposition here, however, which we believe needs further discussion. That is the fact that under article IV, sectiton 3, of the Constitution of the United States, the Congress of the United States has the power and the duty of regulating and disposing of the territory and property of the United States.

We believe that under these circumstances it is incumbent upon the Congress to give expression to its views of policy in this connection and accordingly we come to the Congress with that request.

It has been repeatedly held by the Supreme Court of the United States that where the Congress has not spoken, the Court has not the power to go ahead.

You will find numerous, or at least a number of decisions to that effect. Where the Congress has spoken, however, the courts abide by the decision of the Congress.

Mr. MICKENER. Spoken about what?

Mr. McNEMAR. Matters within the jurisdiction of the Congress as conferred upon it by the Constitution of the United States; in connection with commerce, for instance; in connection with the maintenance of the Navy, for instance; in connection with admiralty and maritime jurisdiction, and so forth.

Mr. MICHENER. Has that anything to do with property which inherently belongs to the United States?

Mr. McNEMER. I should say that it had. We are of the opinion, and feel, that the Government of the United States, or the United States as a national entity may have jurisdiction over property. And we speak of it as jurisdiction, not title in fee, but jurisdiction and sovereignty over that property. However, until Congress has expressed its views in a definite manner in connection with a particular use to be made of that property, it cannot be used for that purpose, nor can any other branch of the Government go in and demand or assert that the property be so used, or be prohibited from being so used.

Mr. WALTER. Why could not those views be adequately expressed by an action of ejectment?