the eastern markets with the results already explained. We strongly urge, therefore, that Congress take immediate action to correct the situation such as that provided in the bill now under consideration. (The following letters were received for the record:) THE CHESAPEAKE & OHIO RAILWAY CO., Hon. DANIEL A. REED, COAL TRAFFIC DEPARTMENT, Chairman, Ways and Means Committee, House Office Building, Washington, D. C. DEAR SIR: Hearings are now being held before the House Ways and Means Committee on the Simpson bill (H. R. 4294), covering the proposed extension of the Reciprocal Trade Agreements Act. This bill proposes to establish limitations on the overall quota of crude petroleum and all products derived therefrom to 10 percent, and a 5-percent limitation would be imposed on imports of residual fuel oil. The 5-percent limitation provision affecting foreign residual fuel oil in H. R. 4294 is identical in principle to the proposals contained in 22 or more additional bills previously introduced in the House of Representatives recently. The writer is an advocate of free trade, for he believes it offers the only prac tical and ultimate satisfactory solution to many distribution, as well as other international, problems which may result in wars between nations. It is also appreciated this country cannot be used as an unrestricted dumping ground for commodities produced by cheap labor or for unlimited large surpluses of petroleum products. As a railroad employee and as a voter, I sincerely solicit your support of and vote for the passage of H. R. 4294. A few reasons in favor of this bill are as follows: 1. Complete free trade of petroleum products at this time may cause the deterioration and stagnation of the coal and some segments of the oil industries in these United States. 2. Congress should not ignore legislative safeguards for domestic industries. Today's imports are 154 percent greater than they were in 1946. 3. The displacement of coal by the importation of both crude and residual fuel oil throws a lot of employees in the coal and railroad, as well as in other industries, out of work. 4. In 1952, Federal, State, and local governments lost in tax revenues the equivalent of $1 a ton based on the 31 million tons of coal displaced by the almost 129 million barrels of cheap foreign residual oil brought into this country. 5. The tax loss may be subdivided as follows: Coal industry, at 33.21 per ton. Mine workers, on lost wages. Railroad taxes on lost revenue Railroad workers, on lost wages_ Transportation tax at 4 cents per ton-- Total_ Less import taxes paid at rate of 54 cents per barrel on 89,971,000 barrels. $12, 230, 000 9, 797,000 10, 357, 000 5, 571, 000 1, 240, 000 39, 195, 000 4,723, 000 Grand total----- 34,472, 000 6. As cheap oil floods the United States, State conservation bodies will be forced by lessened demand for their oil to make further cutbacks. This may result in a prolonged continuation of narrowing profit margin in the domestic oil industry and impede efforts of domestic oil producers to meet defense goals. Narrowing profits and lack of economic incentives, no doubt, may be responsible for the present weakening of essential domestic oil-well drilling programs. 7. The importation of residual fuel oil in 1952 was slightly less than 5 percent of the total domestic demand for petroleum and petroleum products. Therefore, this restriction should not work an undue hardship on importers of foreign oil unless they propose to use the east coast as a dumping ground. In a number of press releases recently, the proponents of the unrestricted importation of foreign oil claimed heavy imports of fuel oil have little to do with the present plight of the coal industry. Over 128 million of the 129 million barrels of residual fuel oil imported last year were taken in on the east coast and, in most instances, represented a direct displacement of coal. In addition, over 192 million of 209.5 million barrels of foreign crude oil also moved to the east coast. In December 1952, the yield of residual fuel oil from crude oil on the east coast was 22.7 percent. Therefore, it is reasonable to assume this foreign crude oil produced about 44 million additional barrels of residual fuel oil in 1952. This had the potential displacement of another 10 million tons of coal in the generation of steam and which was not taken into consideration in computing the tax losses of $34,472,000 shown in item No. 5 above. In order that you may appreciate the extent to which the importation of petroleum has increased during the past 5 years, we are showing below the receipts of crude and residual fuel oils for the years 1948 and 1952: Trusting you may see your way clear to support and vote for bill H. R. 4294. Most respectfully, The Honorable DANIEL A. REED, Chairman, Ways and Means Committee, GEORGE G. RITCHIE. NEW YORK CENTRAL SYSTEM, House of Representatives, Washington, D. C. Dear Sir: Having recently returned from a trip to the coal fields in the States of West Virginia, Virginia and Pennsylvania, I am now more fully conscious of the necessity for some legislative action limiting the importation of foreign residual oil along our Atlantic seaboard. The specter of a depression which we of the Republican Party abhor has already reared its ugly head throughout the entire eastern coal field, and if remedial action is not immediately forthcoming, I am fearful that this condition will spread to all branches of industry and agriculture alike. Coal and transportation are two of our basic industries, and while I have long subscribed to the principle that we must import certain commodities if we are to maintain a proper trade balance with friendly nations, I am equally certain that it is not the intention of the Republican administration to permit a small number of large oil companies to monopolize markets through the medium of imported residual oil at dump rates, thereby threatening the economic welfare of a large number of our people who are dependent upon the coal, railroad, and affiliated industries for their livelihood. In light of the facts brought out at the hearing on the Simpson Bill (H. R. 4294), I earnestly hope that you will actively support the enactment of that portion of the bill which contains the 5 percent limitation on foreign residual oil. Thanking you for your good cooperation in the matter, and reaffirming my belief in the principles of the Republican Party, I am Respectfully yours, HARVEY L. WILLARD. The CHAIRMAN. The next witness will be Mr. Brewster B. Jennings, president of the Socony-Vacuum Oil Co., Inc., New York City. Just before you take the stand: The committee has received a statement from Congresswoman Kee of West Virginia, in support of the section of H. R. 4294 which would impose a quota limitation on imports of residual fuel oil. Mrs. Kee is addressing a letter to the members of the committee on this subject. Without objection, I will have Mrs. Kee's statement inserted in the record at this point. 82604-53-78 (The statement referred to is as follows:) A STATEMENT TO THE HOUSE WAYS AND MEANS COMMITTEE BY CONGRESSMAN ELIZABETH KEE (DEMOCRAT) OF WEST VIRGINIA'S FIFTH DISTRICT Mr. Chairman, I appreciate the opportunity of appearing before this committee and testifying in support of H. R. 4294. In previous testimony the committee has heard detailed accounts of the damage to the economy of all coal-producing States by the seas of residual oil imports that are deluging United States fuels markets, particularly on the east coast. You have also heard witnesses describe the danger to our country's security that comes with unlimited shipments of foreign residual oil as a result of the closing of mines that are so vital to a war-production program. I shall refrain from a general review of the import story and its disastrous impact upon our Nation and its working people, and I think that I can avoid repetition if I confine my remarks to conditions in a local coal area which, in this case, is the district which I have the honor to represent in Congress. Only a short time ago the New England States consumed between 17 and 18 million tons of southern coal annually, but during the last several years foreign residual oil has displaced this coal in increasing amounts, to a point where now nearly two-thirds of our southern coal-much of which comes from mines in the Fifth Congressional District-has been flooded out of these markets. It is hardly necessary to explain the consequences of this impact on the economy of our mining communities, yet anyone not familiar with present conditions in these coal-producing areas would have difficulty visualizing the extent of the distress that foreign residual oil has brought about. West Virginia's coal miners are a proud and hardy people. They are the most representative group of real Americans that you will find anywhere else in our great country. Some are descendants of our Revolutionary heroes, and many, many others are offspring of settlers who were contributing to America's growth and progress even before West Virginia became an independent commonwealth in 1863. We have natives of the British Isles and the European Continent who have been miners through the ups and downs of the Nation's economic history, and we have young men who have known only America except for that period a decade ago when they served their flag on the other four continents. Our miners, like their fellow West Virginians on the railroads, in other industries, and in places of business in our towns and cities, ask only the right to earn a living. They are complaining now, and justifiably so; they know that their livelihood is being taken away from them through a trade policy that impoverishes many while enriching but a few. Those few are the international oil people who defiantly and disdainfully usurp coal's rightful markets under the false banner of free trade. There can be no free trade where there is fraudulent trading. Our people must be protected against international price fixers, and it is the duty of the Congress to provide this protection. I am aware of the parade of the highest ranking members of the executive branch of our Government who last week descended upon this committee with their sermons-which, incidentally, were not necessarily consistent nor essentially factual to the Congress of the United States. I realize that such opposition makes our work much more difficult. But I respectfully remind the members of this committee that it is the responsibility of the legislative branch of our Government to make these decisions. It may be the duty of those officials of the executive departments to repeat and resound the preferences of the President, but it is the duty of the Congress to make the ultimate decision, in behalf of the people of our land, relative to the problem which now confronts this committee. It is for this reason that I appear here today. I wish to call your attention to the fact that I have been besieged with appeals from the people of my district in behalf of legislation to limit the amount of residual oil imports to 5 percent of domestic demand for the corresponding calendar quarter of the previous year, as provided in H. R. 4294. These appeals do not come only from our mine workers and our coal operators. They are from printers, equipment manufacturers, automobile suppliers, editors, hotel operators, glass and tile distributors, insurance men, lumbermen, sand producers, welders, furniture dealers, grocers, and from scores of other businessmen and workers in my district. In addition, I have letters from many, many women who perhaps more than anyone else understands the significance of the situation from a family and social point of view. These wives and mothers have made a plea to me for help because their husbands and sons are forced to leave their homes and children to seek work elsewhere, due to the mass unemployment now existing in West Virginia. They are going into Ohio and Michigan and to any other States where there is a possibility that they will find work. This situation has serious implications. Our families should be encouraged to remain together, yet by failing to put a stop to the condition responsible for the cleavage that is developing, this Government is in actuality sponsoring a wholesale assault upon our family life. Mr. Chairman, the people of my district will sincerely appreciate your favorable action on the proposed legislation to restrict residual oil imports, thereby giving us an opportunity to return to our jobs and to keep our families together. I thank you. The CHAIRMAN. We are very glad to hear you, sir. Will you just give your full name and address and the capacity in which you appear? STATEMENT OF B. BREWSTER JENNINGS, PRESIDENT, SOCONYVACUUM OIL CO., INC., NEW YORK, N. Y. Mr. JENNINGS. My name is Brewster Jennings. I am the president. of the Socony-Vacuum Oil Co., from New York. I appreciate the opportunity of appearing before this committee to comment on certain aspects of H. R. 4294. The oil-import problem is one that must be dealt with in the best interests of the United States and without reference to its effect on Socony-Vacuum or any other company. So far as Socony-Vacuum is concerned, I would like to say at the outset that directly or through affiliates we are interested in the oil industry throughout virtually all of the free world. Nevertheless, the great preponderance of our investment is in the United States. We plan to spend more money in 1953 than in any previous year of our company's history to find additional oil within the United States. Three-fourths of all the capital investments our company has made since the war have been made in the United States. We believe it is in the national interest that the United States draw on imported oil as well as on its own reserves to meet its tremendous and constantly increasing needs. This country consumes about 40 percent of the oil used in the world, but has only 25 percent of the world's proved crude reserves. We are using these up three and a half times as fast as is the rest of the free world. United States reserves have increased during recent years, but the ratio of our proved reserves to our consumption is less than it was before World War II. There is still a lot of oil to be found in the United States, but we must not forget that oil is an exhaustible resource and that the supply is limited. Oil is particularly important to the United States because of its highly industrialized economy. Competent authorities. estimate that United States oil consumption by 1975 will be about 14 million barrels day, almost double the 1952 rate. Unless oil finding in the United States is far in excess of past performance, consumption of this magnitude would require oil imports substantially above current levels. It is not necessary to peer into the future to see the importance of oil imports. Such imports have been necessary in past years to meet our demands. Without them, we would have had shortages in the United States in 1945, 1946, 1947, 1948, and 1951, even with maximum domestic production. Some of you will recall the severe winter of 1947-48, when oil companies in the east were urged to increase oil imports so consumers would be sure of enough oil to heat their homes. On the west coast right now, production falls short of meeting demand, and increasing imports have become necessary to take care of the growing needs of that section of the country. There are two principal categories of oil imports: Crude oil and residual fuel oil. Crude oil is the raw material used by refiners. Residual oil is a product of refining and is used in large installations under boilers to generate steam for heat and power. Imports of residual oil have no important effect on domestic crude-oil producers. This is because this heavy fuel oil generally sells for less than the cost of the domestic crude from which it is obtained and so it is unlikely that United States refiners would increase their crude runs to relieve shortages of residual oil. I would like to take up crude-oil imports first. Despite some recent cutbacks, domestic crude-oil production this year is expected to average 6,400,000 barrels a day, an alltime high. This would exceed 1952 production by 138,000 barrels a day and 1946 production by 1,650,000 barrels a day. The cutbacks just referred to have reduced domestic production some 330,000 barrels a day from the rate obtaining in the peak month of December 1952. Though imports add to the total supply, other more important factors have led to these cutbacks, such as: (1) a very rapid increase in domestic crude production which started in the last quarter of 1952 and added 271,000 barrels a day to the production of the previous quarter; (2) exceptionally warm weather during the past winter, which reduced consumption of liquid fuels during the 6 winter months some 236,000 barrels a day, and (3) the increased availability of natural gas. The additional gas used in 1952 over 1951, some of which displaced coal, was equivalent in energy value to approximately 200,000 barrels a day of oil. By way of comparison, 1952 crude-oil imports exceeded 1951 imports by 82,000 barrels per day; and it would appear that 1953 imports will be up some 68,000 barrels per day over the rate for 1952. About a third of these increases reflect importations into the oil-short west coast. Despite the fact that domestic oil production in 1953 is likely to be at an alltime high, it has been suggested by some that domestic oil operators have become discouraged and that the effort to find new oil fields has dropped off substantially. Let us see whether the figures bear this out. In 1952 more exploratory wells and more development wells were drilled than in any previous year in our history. While 3 percent fewer development wells were drilled in the first quarter of 1953 than in the same period in 1952, there have been increases of 6 percent in exploratory wells and 10 percent in geophysical crews at work. The present problem is in many ways similar to, though on a much smaller scale than that in 1949-50. It had been necessary at one point in 1949 to cut back domestic production as much as 1 million barrels |