The CHAIRMAN. We thank you very much, sir, for your very nice paper relating to the oil situation in your State, and the effects of the imports upon your communities and your market there.

Are there any questions?

Mr. Sadlak will inquire.

Mr. SADLAK. Mr. Ritchie, the picture which you have presented to us concerns the overall oil picture of Kansas, but how much concentration do you have on the crude or the residual oil?

Mr. RITCHIE. I did not get the first word.

Mr. SADLAK. What you have presented to us now formally, it seems to me, is the overall oil picture for Kansas, and does not confine itself to the heavier residual oil. The imports we are talking about primarily, I think, are concerned with the residual oil.

Mr. RITCHIE. I do not get that impression at all, sir. The imports we are talking about are the overall effect of imports. With a million barrels of imports coming into this country now, the demand for Kansas crude, regardless of whether it is made into gasoline or residual fuel, is backed up and decreased. So, sir, I could not treat it on a residual oil basis at all, because I am not prepared to. I do not have the figures on the residual part of the barrel of crude that comes out of Kanas production.

Mr. SADLAK. Since 1946, has not the residual oil that we have here made here in the United States, steadily declined until now?

Mr. RITCHIE. Sir, I am not in a position to answer that. Some of the other men may have that information.

Mr. SADLAK. Let me ask you this question. I thought we were talking about 5 percent previously. I see that you select here a percent quota on the imports. Why did you select 10 and not 5 as it pertains to you, or a greater percentage?

Mr. RITCHIE. I think we all agree within the industry that there must be a certain amount of import. Nobody wishes to restrict them completely. The world-wide demand for oil has increased. We feel that 10 percent is realistic. It about represents what has seemed to be fair and seems to be workable. The 5 percent, as I remember, was back some 7 or 8 years ago. It was suggested then. I think conditions have changed. I say to you very frankly that I, for oneand I think every man in Kansas-realize that we should not cut out all oil imports, but we do think that imports should take a reasonable part of the load that we have to take.

Mr. SADLAK. My question, of course, is directed more for information along the residual line. Your statement, and what I gather from you, is primarily concerned with the overall oil picture.

Mr. RITCHIE. The overall oil picture as it affects my community, talking not in residual barrels but total barrels of oil.

Mr. SADLAK. Thank you very much.

The CHAIRMAN. We thank you very much, sir, for your fine presentation.

Mr. RITCHIE. Thank you, sir.

The CHAIRMAN. The next witness is Mr. J. P. Jones, representing the New York State Producers Association, the Bradford Pennsylvania Grade Crude Oil Association, and the Middle District Pennsylvania Oil Producers Association.

While you are not from my district, Mr. Jones, you are so close to it that we sort of claim you anyway. You have done great work in

representing the economic interests of one of my counties, an oil county, and we are glad to have you here.

If you will just give your name and your reason for appearing here, and the company you represent, we would appreciate it very much.

STATEMENT OF J. P. JONES, REPRESENTING THE NEW YORK STATE OIL PRODUCERS ASSOCIATION, THE BRADFORD DISTRICT, PENNSYLVANIA OIL PRODUCERS ASSOCIATION, AND THE MIDDLE DISTRICT, PENNSYLVANIA OIL PRODUCERS ASSOCIATION, BRADFORD, PA.

Mr. JONES. Thank you, Congressman Reed.

My name is J. P. Jones. I live in Bradford, Pa., where I have been engaged actively as an independent oil producer for the past 25 years. I am also employed by the Pennsylvania Grade Crude Oil Association as director of production.

I might add that I represented the State of Pennsylvania for the past 3 years on the Interstate Oil Company Commission.

I am appearing before this committee to represent the New York State Oil Producers Association, the Bradford District Pennsylvania Oil Producers Association, and the Middle District Pennsylvania Oil Producers Association.

We wish to protest excessive imports of foreign oil as a dangerous threat to our relatively small and independent segment of the United States oil industry.

I hope to emphasize as strongly and as clearly as I can that our portion of the United States oil-producing industry is one that operates on a basis of high costs-and high quality-but small volume.

I will strive to show that our segment of the oil industry relies for its welfare on a strong and healthy oil industry within the shores of the United States. Finally, and not least in importance, I shall endeavor to show that, deprived of the oil reserves that underlie the stripper-well areas in this country, the nation would suffer a severe and needless loss.

Members of the three associations of oil producers for whom I speak make up the bulk of the producing industry in the northwestern section of the Commonwealth of Pennsylvania and the southwestern section of New York State. Crude-oil production from this area currently averages somewhat over 40,000 barrels daily. This oil is pumped from approximately 80,000 wells owned by more than 3,000 active producing interests. The oil is processed by 13 area refineries. having a total capacity of approximately 75,000 barrels daily.

These plants draw crude also from fields in southwestern Pennsyl vania, West Virginia, and southeastern Ohio which, together with the district I represent, go to make up the Pennslyvania Grade crude-oil region.

The crude oil produced in this region is known in the trade as Pennsylvania Grade and is noted for the high content and fine quality of its lubricating oil.

During World War II, the Pennsylvania Grade crude-oil industry was depended upon to furnish more than 15 percent of the Nation's total output of lubrication.

Another sign pointing to the importance of this crude is the fact that the national average of lubricating oil recovery from all crudes, including Pennsylvania Grade, is 2.8 percent, while the average lubricant recovery from Pennsylvania Grade crude oil alone is more than 23 percent.

The crude oil produced from the whole Pennsylvania Grade region comprising New York State, Pennsylvania, West Virgina, and southeastern Ohio is currently averaging about 51,000 barrels daily. From this crude, approximately 72 percent of the Nation's lubricating oils are made. Four-fifths of Pennsylvania Grade crude oil comes from the area I am representing.

Production of Pennsylvania Grade crude oil is accomplished almost entirely by a variety of usually expensive techniques to which the name "secondary recovery" is given.

The oil reserves underlying New York State total 52 million barrels and those underneath Pennsylvania amount to 121 million barrels, according to a recent report by the reserves committee of the American Petroleum Institute.

These figures represent estimates of crude-oil reserves that the committee felt would be recovered through use of presently known methods and under current economic conditions. Advance the crude-oil market, and available crude reserves in secondary recovery areas would be increased proportionately. Cut the crude price, and our secondary recovery crude-oil reserves, as a practical matter, shrink.

Development of reserves by expensive and highly technical secondary recovery is a long-term program which depends on stability in the outlook for the domestic oil industry over a several-year period ahead.

It should be explained here, however, that the figures on reserves which I have quoted represent only a small fraction of the oil actually underground. Such oil would amount to several billions of barrels, if we knew how to recover it.

For this committee's purpose, let me say only in this connection that, on the basis of the best information available to the American Petroleum Institute, the reserve stores of crude petroleum beneath New York State and Pennsylvania would, if produced and refined, yield to the Nation more than a billion and a half gallons of highquality lubricating oils.

Since the First World War, secondary recovery has played a greater and greater part in maintaining and increasing the volume of our recoverable petroleum reserves.

This recovery technique is necessary because production practices in the not-too-distant past were wasteful and inefficient, leaving in the older oilfields of this Nation, in many cases, more than two-thirds of the oil originally in place.

An oil sand may be likened to a wet sponge; squeeze it and water comes out; squeeze it again and you get more water, but less than in the first squeeze; eventually, you have to wring out the sponge.

Nature originally provided energy needed to "squeeze" the oil out of the sands. That energy was in the form of pressured water or gas. This pressure forced the oil out of the sand formations, up to a certain point. After this point is reached, the well becomes what is known as a stripper. We must "wring out" the sands through the process known as secondary recovery.

Today, improved conservation practices and better operating methods produce oil from newly discovered fields in a much more efficient manner than operators dreamed of 25 years ago.

As a consequence, there is little room left for the application of secondary recovery in these newer fields. However, many of the oilfields now producing were discovered and developed before the application of improved technology and conservation practices. Consequently, we have scattered across this country many fields with a very high oil residue left after exhaustion of the primary energy.

A good example of what secondary recovery will do is found in the Allegany County, N. Y., field, which is in your district, Mr. Chairman, as you know.

The CHAIRMAN. A very fine county, and wonderful people.

Mr. JONES. This field has produced more oil by secondary recovery methods since 1918, when you entered this Congress, than has been produced in all the years from its discovery date in 1880 to 1918.

I mention this instance only to show what can be accomplished in an old-stripper field through secondary recovery methods of production. I cite it also to remind you what a loss of irreplaceable national resources the United States would suffer if secondary recovery methods had not been developed and applied.

Secondary recovery originated in the Bradford and Allegany fields and has spread virtually to every oil producing State. The possibilities of this method of oil recovery are indicated in the national stripper well survey conducted by the Interstate Oil Compact Commission. This report shows that there are approximately 3,500,000 acres of land extending from New York to California which are prospective areas for the application of secondary recovery.

The wells on these 32 million acres of land are estimated to total over 300,000, each of which produces a little more than 3 barrels of oil a day on the average.

Although the daily production per well is small, yet in the aggre gate these wells produce about a million barrels per day, or about one-sixth of the total production of this country, just about what the oil importers are bringing here.

More important by far to the Nation, however, than the daily production of our stripper wells are the reserves underlying these stripper-wells acres. According to the Interstate Oil Compact Commission survey, almost a quarter of our Nation's oil reserves are to be found beneath stripper-well areas. One-half these reserves in stripper fields will have to be recovered by high-cost secondary methods.

These facts pertain to a segment of the producing industry which too often in some quarters is regarded as unimportant. Many stripper-wells areas are now allowed to continue in operation solely in the hope that effective methods of secondary recovery can some

applied.

day be

Keeping these wells pumping under a strong, stable, domestic industry is essential to the Nation's economy and security. This point can be summarized in the phrase so popular among this country's independent oilmen, "There is no security in foreign oil for the defense of our own borders."

Premature abandonment of stripper wells not only loses the existing production, but also constitutes a wasteful loss of crude oil reserves underlying the area involved. Engineers say it would be extremely

costly and thus very unlikely that completely abandoned stripper areas ever would be redeveloped or reworked by secondary recovery methods. Secondary recovery operations require the installation of costly equipment. They need expensive development work. Usually the property has to be entirely redrilled. A waiting period of a year and a half to 3 years is required before the investment begins to yield any

returns.

Normally, the secondary recovery operator works on a small margin of profit. Consequently, there must be some reasonable assurance of stability in the industry before secondary recovery operators can afford to risk their capital on development work.

The rapid rise in the importation of foreign oil has threatened the stability of the oil industry of the United States. Consequently, new development work here is being discouraged. This is especially true in the New York and Pennsylvania area.

During the regime of the Office of Price Stabilization the price of Pennsylvania Crude crude oil was frozen at a level below our historical price relationship to other crudes. Efforts to obtain adjustment failed despite the fact that development and material costs continued to rise.

Once price ceilings were removed in the latter part of 1952, purchasers in the Pennsylvania Grade region were able to post only small increases in the price of crude.

The reasons can be attributed directly to the unstable conditions created in the industry by the excessive imports of foreign oil at that time.

During the long period of a frozen crude price, operators in the area which I represent were discouraged from doing the development work necessary to insure our refineries of an adequate supply of crude oil. Excessive imports today are creating unstable conditions and are discouraging development work that should be under way if the industry of our region is to continue to operate at a strong and healthy level.

We believe that Congress should establish reasonable controls over imports. By doing so you will assure the continued operation of thousands of secondary oil properties throughout this country and encourage the application of secondary recovery methods necessary to recover the vast oil reserves underlying the stripper-well areas of the United States.

The CHAIRMAN. That is a very fine statement, and we appreciate your appearance here.

Are there any questions?

Apparently not.

I recall with great pleasure and very happy memories the fine service your father rendered in the Congress of the United States from the district from which you come.

Mr. JONES. Thank you, Congressman.

The CHAIRMAN. Mr. H. B. Fell, president of the Simpson-Fell Oil Co., Ardmore, Okla., and executive vice president, Independent Petroleum Association of America.

Mr. FELL. Mr. Majewski, who was on the list of earlier witnesses, is here now, and if it is satisfactory to you, we will let him go on, and then I will close.