really known, but in my opinion, we must take the risk, on the basis of this report, that that production will continue indefinitely.

Mr. VINSON. Then the committee can understand from the statement you just made that there will probably be a constant production, or at least a minimum of around 24,000 barrels a day from this shallow zone?

Captain MEADE. I would think that we might expect that for some time; yes, sir.

Mr. VINSON. How long would it be before the shallow zone is exhausted then at that rate? How many years before the shallow zone will be gone, assuming somebody figured it out?

Captain MEADE. A straight mathematical computation of that kind, that would be about 15 years.

Mr. VINSON. Then the committee can understand now, the shallow zone will fade away in approximately 15 or 20 years?

Mr. GAVIN. I think that is yet to be determined.

I just want to say, Mr. Chairman, you cannot say definitely it is going to be 15 years.

Mr. VINSON. The gentleman is an expert.

Mr. GAVIN. I am not an expert, and I am not an oilman. I am not an expert in the oil field.

The CHAIRMAN. Gentlemen, let the witness answer.

Captain MEADE. In answer to your question, sir, when an oilfield produces, it does not produce uniformly in that simple arithmetical fashion that we have just been discussing. The producibility of a well falls off in accordance with the well-recognized curve. It would be a useful field, even with these corrected measures for a substantially longer period than this simple computation would show, but it eventually would run out.

Mr. VINSON. Now, so the public can understand, and the committee can understand, it is going to be necessary to draw out around 24,000 barrels of oil daily out of the shallow zone. You estimate there are 350 million barrels in there now, so it can easily be figured how many years the shallow zone will live?

Captain MEADE. Yes, sir.

Mr. VINSON. Under the unit-plan contract, you are now in what is known as the secondary period?

Captain MEADE. The primary period is ended; that is right.

Mr. VINSON. Under the secondary period Standard gets one-ninth and the Government gets eight-ninths?

Captain MEADE. Yes, sir.

Mr. VINSON. The public is sold the eight-ninths.

Captain MEADE. Yes, sir.

Mr. VINSON. And Standard takes its one-ninth and does with it what it wishes.

Captain MEADE. Yes, sir.

Mr. VINSON. If you go from the primary period to the secondary period, what happens?

Captain MEADE. The primary period was specified as that period required to allow Standard to withdraw approximately 28 million barrels as part of the compensation for them to enter into this contract. Mr. VINSON. When they withdrew that 28 million barrels, then automatically under the terms of the contract that puts them in

Captain MEADE. Yes, sir.

Mr. VINSON. Did the engineers make any report as to the condition of seepage of water when the Standard had drawn out its requirements? Captain MEADE. It is my understanding that the engineering problems of the field were under study in that committee, at that time. I have no knowledge or recollection of any specific report on this problem being made coincident with the end of the primary period. Mr. VINSON. When was it first called to your attention, or who called it to whose attention that there was a seepage and a flooding?

Captain MEADE. I assumed duty as Director of Naval Petroleum Reserves in December of 1950, and prior to that time I had the advantage of 6 months of duty as the deputy to my predecessor, Commodore Greenman. During that indoctrination period it was thoroughly explained to me that there were very serious engineering problems in this field, and that their effect was then unknown, but that a study was under way in an attempt to ascertain the results. has gone on, during my incumbency as Director, various engineers with whom I have consulted, of my staff, have developed aspects of growing importance which tended to show the possibility of trouble from losses of oil in this field. In January of last year, Mr. John Thatcher, of Standard Oil, and I were in consultation on problems in relation to this contract, and particularly with relation to some suggested changes, and Mr. Thatcher reminded me, and I agreed, that the problem of possible losses of oil in this field should be solved. And as a result of that, our Engineering Committee were given some specific and pointed questions to go to the heart of this problem and to satisfy both parties to the contract that all necessary information was being obtained. Partly as a result of that, and partly as a result of the fact that the subject was already under study, the Engineering Committee came up with their reports about June or July of last year, by which several of the recommendations contained in this final report were defined and others suggested. The intervening time has been occupied by the Engineering Committee in refining and improving their recommendations to form this formal report which is before us.

Mr. VINSON. So the committee can understand, this problem was beginning to shape up at the suggestion of Mr. Thatcher, a member of the Engineering Committee, and after consultation with you?

Captain MEADE. He is not a member of the Engineering Committee, sir. He is an official, an assistant to the vice president of Standard Oil of California.

Mr. VINSON. I see. Who is the Standard's members of the Engineering Committee?

it?

Captain MEADE. There are three members, sir.

Mr. VINSON. Now the committee only consists of three, doesn't

Captain MEADE. Three members representing each party.

Mr. VINSON. That is right. There are six?

Captain MEADE. Yes, sir.

Mr. VINSON. All right. You need not give that. After consultation with Mr. Thatcher, you and he propounded the same questions to the six members known as the Engineering Committee?

Captain MEADE. Yes, sir. We separately propounded similar

Mr. VINSON. Who originated the thought, was it you or Mr. Thatcher?

Who originated the idea there was water seeping into the field from the north and east, and migration at the south end of the field?

Did you find that out from the previous reports, or did you find it out through conference with Mr. Thatcher?

Captain MEADE. I would say the basic thought or apprehension as to the idea was put in my mind during my indoctrination period with Commodore Greenman.

Mr. VINSON. All right. The Navy and you originated the thought there sould be a further study to determine whether or not the field was being dissipated by water coming in or oil going out?

Captain MEADE. I do know who originated it before I came into it, but certainly the parties joined in the analysis of the study.

Mr. VINSON. All right, as a result of that study-it doesn't make much difference, but just to keep the record clear-as a result of that study the engineering members have recommended that the 18,000barrel increase from the entire field, daily, take place?

Captain MEADE. Yes, sir.

Mr. VINSON. Making a total of 24,200?

Captain MEADE. Yes.

Mr. VINSON. Now, at this time you are drawing out 6,200 barrels? Captain MEADE. Approximately; yes, sir.

Mr. VINSON. Standard gets one-ninth of that?

Captain MEADE. Yes, sir.

Mr. VINSON. How many barrels is that?

Captain MEADE. About 700 barrels a day.

Mr. VINSON. 700 barrels. They have only been getting 700 barrels since what date?

Mr. SMART. August 2, 1950, when the secondary period went into effect.

Mr. VINSON. That is right. Since 1950, since the secondary period went into effect, they have only been getting one-ninth of the total of 6,200 barrels a day.

Captain MEADE. Yes, sir.

Mr. VINSON. Under this proposal can you tell the committee how many barrels Standard will get out a day?

Captain MEADE. They will get approximately-it will be one-ninth of approximately 24,000, which would be about 2,700 barrels.

Mr. VINSON. About 2,700 barrels. What is the difference between 700 and 2,700?

Captain MEADE. 2,000.

Mr. VINSON. There will be an increase to Standard of 2,000 barrels on this.

Captain MEADE. That is correct.

Mr. VINSON. All right, Mr. Chairman, thank you very much.
The CHAIRMAN. Mr. Gavin.

Mr. VINSON. Wait one moment, sir.

Mr. Chairman, for the record, I want to state, as a member of the committee, I have a statement of some engineers who offered some alternative suggestion. The Secretary of the Navy called me the

before the committee, and to make the record complete for the committee in his official capacity. I was going to ask the chairman to pass it up because it was his responsibility, and I told him about this memorandum. He asked me to send it to him, so I sent it to him. Now I want to ask the captain, will he contact the Secretary and get that memorandum so that we can have the benefit of the conclusions that our engineers make in regard to those alternative methods of protecting the field?

Captain MEADE. I would be very happy to do so.

The CHAIRMAN. No doubt the Secretary will furnish that when he comes to testify before us.

Mr. Gavin?

Mr. GAVIN. Captain, there is nothing definite about having a definite production. You can't say definitely that you are going to get 18,000 or 24,000, or how long the field is going to hold out. That is probably mathematical, isn't it? The field may "peter out" or it may go on for 30, 40, or 50 years, but it will rapidly decline? Captain MEADE. It will certainly decline. Just how fast is a matter of engineering judgment, sir.

Mr. GAVIN. That is right. It is probably mathematical.
Captain MEADE. Yes, sir.

Mr. GAVIN. Let me ask you, Captain, how do you sell the oil? Captain MEADE. By law, Mr. Gavin, we are required to sell our share of the oil after public advertising. The oil that is now being produced has been sold after public advertising and there is presently a 3-year contract with Wilshire Oil Co. of California, by which we dispose of our Navy share of oil.

Mr. GAVIN. What is that crude worth out there now?

Captain MEADE. It is about $2 per barrel, approximately.

Mr. GAVIN. If we put $1,500,000 in drilling these 39 wells, how long do you think it will be before we get our investment back?

Captain MEADE. We will get our money back rapidly, Mr. Gavin. With this kind of production we would be taking in $20 million a year. Mr. GAVIN. As long as it holds up.

Captain MEADE. Yes, sir.

Mr. GAVIN. It is a shallow field?

Captain MEADE. Yes, sir.

Mr. GAVIN. I have no further questions.

Mr. HÉBERT. Captain, as I understand it you direct all the oil reserves for the Navy.

Captain MEADE. Yes, sir.

Mr. HÉBERT. The entire oil reserves of the Navy?

Captain MEADE. The seven pieces of property Mr. Smart described; yes, sir.

Mr. HÉBERT. How many similar reserves as Elk Hills does the Navy have?

Captain MEADE. There is only one field like Elk Hills, really developed and ready as a military reserve.

Reserve No. 2 is Buena Vista Hills, south of Elk Hills. It is entirely leased out. Reserve No. 3, in Wyoming, is completely shut in. We have been exploring it recently but it is not used. No. 4 in Alaska, is in the process of an exploration program.

The three oil shale reserves are consigned to the Navy for custody,

However, the Bureau of Mines is conducting experimental work at their experimental and development plant at Rifle, Colo.

Mr. HÉBERT. In other words, this is the only active reserve you have under the Navy jurisdiction at this time?

Captain MEADE. Yes, sir.

Mr. HÉBERT. You have that in partnership with the Standard Oil Co. of California.

Captain MEADE. Yes, sir.

Mr. HÉBERT. Is that the common practice of the Navy as far as oil reserves are concerned?

Captain MEADE. It is the only case, as far as I know, and it took a special act of the Congress to do it.

Mr. HÉBERT. Has the Navy explored oil?

Captain MEADE. Not outside of its jurisdiction.

Mr. HÉBERT. I am trying to establish the policy of the Navy in exploring oil.

sir.

Captain MEADE. We have explored within our own reserves; yes,

Mr. HÉBERT. The Navy has explored itself?

Captain MEADE. Yes, sir; we are doing so in Alaska, and we have ended up such a program in Teapot Dome, Wyo.

Mr. HÉBERT. You have the equipment to do the exploring?
Captain MEADE. We have done such work by contract, sir.

Mr. HÉBERT. I am trying to arrive at the fact the Navy does have to enter into a contract with a private organization to do the actual work of exploring.

Captain MEADE. That is correct.

Mr. HÉBERT. The Navy does not have its own equipment to explore.

Captain MEADE. There is some Government-owned equipment in Alaska. We have found it expedient on that type of contract to buy our own equipment. The purchasing is done by the contractor and the drilling is done by the contractor.

Mr. HÉBERT. Outside of this one operation in Elk Hills, has the Navy entered into any contract with a private oil company?

Captain MEADE. None that have come to my attention. I don't think there have been any others of this nature.

Mr. HÉBERT. What does the Navy get out of this? I notice you plan to pay $1.5 million to put the rigs up, and give Standard Oil 2,800 barrels a day. What does the Standard Oil Co. furnish?

Captain MEADE. There is a complex contract, sir, which provides for the ultimate division of the oil, in accordance with participating percentages, and the ultimate sharing of costs. The production of oil was put out of balance by the terms of the contract, Standard getting during a primary period approximately 28 million barrels of oil for compensation for coming into the deal.

The Navy pays initially the development costs. These are shared ultimately. The operating costs are shared. The Navy sells its oil and deposits about $4 million a year in the Treasury. Standard uses its oil. There are incidental products sold, such as gas, natural gasMr. HÉBERT. By whom?

Captain MEADE. By the Navy. We sell ours. I don't know what Standard does with theirs.