is accomplished we will lose substantial amounts of oil every day, which oil will be forever lost.

The Navy witnesses have stated that this loss of oil would adversely affect not only the Navy's interest, but the interest of the Standard Oil Co. of California.

The witnesses further testified that since oil is being lost, the increased production which has been recommended in order to prevent and curtail that loss would be entirely in keeping with the obligations of the Navy to practice conservation of this oil in this field.

With this brief background, I would like for the Secretary to advise the committee of his viewpoint in this particular matter, and since this is the first time that the new Secretary of the Navy, Mr. Anderson, from Texas, has appeared before us, I want to say that the committee is delighted to have you appear before us this morning, Mr. Secretary. You come to us with the highest recommendations and we have heard many wonderful things about you: your background, your career. We want you to feel that this committee at all times stands ready to work with you and cooperate in the fullest degree for the benefit not only of the Navy but of our country.

We want you to feel free to call upon us at any time for any assistance that we might give your Department, that relates to the overall picture of our national defense.

STATEMENT OF HON. ROBERT B. ANDERSON, SECRETARY OF THE NAVY

Secretary ANDERSON. Thank you, Mr. Chairman.

I would like, of course, to express my appreciation for the kind introductory remarks of the chairman, and to say to you that I have learned already that there is a great tradition of cooperation between the Department of the Navy and this committee, and I can assure you that we will do our utmost to maintain that tradition of cooperation, and that you will have the full and complete cooperation of the office of the Secretary.

I have no prepared statement, Mr. Chairman, and if it meets with the pleasure of the committee, I would like to first express my opinion with reference to Naval Petroleum Reserve No. 1, which is the Elk Hills properties.

The committee, of course, knows the recommendations which have been made by the technical men of the Navy and those of the advisory committee. Essentially the recommendations amount to the fact that because of the floodwaters or the underground waters which are coming in on the north flank of the Elk Hills property, they are fearful of the entrapment of some oil, unless there is an increase in the production of the total fluids from the north area, or flank, of the field.

I have read during the past several days with considerable interest the report of these gentlemen and I have had the pleasure of talking with them about it in order to explore the possibilities of whatever other means might be taken in order to conserve the oil that is in the Elk Hills properties. As the committee knows, the pressure is falling on the south point of the reserve. I have discussed with the members of the committee the possibilities of salt water injection on the south end of the field in order to stabilize as nearly as possible the pressures

field is not susceptible of a salt-water drive, which is a secondary method of recovery which is quite widely used in some areas, because of the diverse permeability of the structure in which the oil is placed in this Elk Hills reserve.

From their report-and of course I have to accept the facts of their report as such-the sand is not permeable in the same relationship all the way through, but has a diverse permeability so that water injected into it for the purpose of making a uniform flow of the oil toward a given point doesn't result in the desired result of thus forcing the oil into a common pool, but further increases the possibility of entrapment of petroleum.

Their suggestion is that we drill 36 additional wells along the north flank in order to remove as much fluid as possible. The ratio of oil to water is about 2 barrels of water to 1 barrel of oil.

The suggestion which I would like to make to the committee is made in the light of the fact that the philosophy of the petroleum reserve is that of conserving as much of the oil as possible in the ground in the natural reservoir.

The CHAIRMAN. Of course, that is clearly the intent of the Congress. Secretary ANDERSON. Yes.

The CHAIRMAN. When we passed the law originally, and I think of President Taft, when he set up this Petroleum Reserve No. 1. Secretary ANDERSON. Yes, sir.

The CHAIRMAN. But if the situation has developed whereby we are losing the oil, then to increase the production is really a matter of conservation. It is better to get it now than to lose it forever.

Secretary ANDERSON. That is entirely correct, Mr. Chairman; and to that end I think that there ought to be begun a conservative drilling program along the north flank.

The CHAIRMAN. Of the Shallow Zone.

Secretary ANDERSON. Of the Shallow Zone only.

The CHAIRMAN. And keep intact the Stevens Zone where we can really conserve and hold in the ground the oil that is there.

Secretary ANDERSON. Yes, sir; I am talking only to the Shallow Zone.

The CHAIRMAN. Yes.

Secretary ANDERSON. And not the Stevens Zone. I would suggest that we begin a conservative drilling program along the north flank of the Shallow Zone, with this sort of an idea: that we would dig 1 or 2 wells in each one of the fault areas, proceeding progressively from one fault area to the other, in order that we could have a constant evaluation of how much good our drilling is doing, so that we would not necessarily project a program that had absolute rigidity, but we would be guided by the results in each of the Fault Zones as to how much good we were accomplishing.

That, basically, is what I would think would be a sound approach

to it.

Now, as far as the Stevens Zone is concerned, I would simply suggest to you that we leave the Stevens Zone intact.

Mr. VINSON. Mr. Chairman, may I ask a question?

The CHAIRMAN. Yes, Mr. Vinson.

Mr. VINSON. Following your line of thought, as to the conservative drilling, can you elaborate a little and tell the committee what you

Engineers say, to construct 39 wells in that area. Approximately what length of time would you think would be conservative to put your 39 wells up in that section of the reserve?

Secretary ANDERSON. Mr. Vinson, if we would start with one drilling rig, we could dig two wells per month. It would be my suggestion that we dig these wells or that we space them, say-just for exampletwo in each of the fault zones, so that we might get some idea of the good we are accomplishing in each of the fault areas.

Mr. VINSON. Now

Secretary ANDERSON. Then we would have a basic information which would be much more reasonable, in my judgment, to dictate the ultimate number of wells that might be required to remove a sufficient amount of fluids to effectively save the oil that would be entrenched.

Mr. VINSON. So, as you go along in a conservative manner, it might develop and the engineers might decide from the information they get as a result of the drilling that it will not be necessary to continue to drill the 39 wells?

Secretary ANDERSEN. It could very well, and I think we ought to have a program of some flexibility.

Mr. VINSON. That is right; exactly.

Secretary ANDERSON. Which is the reason for suggesting a rather modest approach to it.

Mr. VINSON. Now, is that same policy going to be followed on the migration of the oil out of the reserve, in the other end of the reserve, where you are going to drill three wells?

Secretary ANDERSON. If I follow your question entirely, Mr. Vinson, I think continuing study ought to be given to the possibilities of injection on the south end of the field in order to stabilize the pressures there. Frankly, the engineers who have examined the properties have evidenced some doubt as to wherher or not you could inject enough fluids to accomplish stabilization.

I don't know whether at this point we could or not, but I think continuing study ought to be given to it, with the idea of attempting some stabilization if it seems to be feasible economically.

Mr. VINSON. Mr. Chairman, may I ask the Secretary a few questions?

The CHAIRMAN. Yes.

Mr. VINSON. Mr. Secretary, will you give the committee your philosophy and your views with reference to a general policy, excluding anything about tidelands, in regard to oil reserves such as this?

Do you think it was a wise thing and a proper thing that the Government have done what President Taft did, and do you look with favor upon that policy of setting aside areas as reserves and trying to keep them in the ground?

Secretary ANDERSON. Mr. Vinson, basically I would regard all of the produceable oil in the United States as a part of the national reserve for national use in times of an emergency.

Mr. VINSON. Well, that is true of everything else in the United States.

it is true of every type of thing.
re is no argument whatsoever that the
of oil is the natural reservoir which is

no quarrel with the notion, with the idea that certain of them should be withdrawn; that they should be explored; that they should be put in a condition of produceability, and that they be regarded as a margin, we shall say, of safety for national-defense purposes.

Mr. VINSON. Well, then, to sum it up this way: Then you find yourself in general accord with the philosophy and the policy that has been announced by Congress from 1912 down to date in regard to conserving this oil in the ground?

Secretary ANDERSON. Yes, sir.

Mr. VINSON. And that you will oppose vigorously any effort to exploit the field, to take the oil out of the ground. You want to keep it in the ground.

Secretary ANDERSON. That which we are maintaining as a produceable reserve for times of emergency I think should not be exploited. Mr. VINSON. Now, for the record, Mr. Chairman, I hope you will let me read a little historical background. I want this in the record. Then I want to ask one question of the Secretary and then I am through. I want to read this for the record. [Reading:]

President Taft, by Executive order dated September 27, 1909, withdrew certain public lands from entry in California and Wyoming to preserve them for future Government needs. The authority of the President to thus suspend the operation of laws enacted by Congress permitting acquisition of lands in the public domain was questioned. Although not sharing this view, President Taft requested the Congress to confirm this authority in the President, and Congress favored this request by the passage of the act of June 25, 1910, the so-called Picket Act (36 Stat. 847). President Taft, thereupon, by Executive order dated July 2, 1912, confirmed the withdrawal which he had earlier made by the order of September 27, 1909.

President Taft's two withdrawal orders did not mention the Navy nor did they expressly allocate any of the lands for the benefit of the Navy. By Executive order dated September 12, 1912, however, naval petroleum reserve No. 1 (Elk Hills, Calif.) was created, but the Navy had no power in respect to the reserves. Because of the inability of any agency of the Government to deal with the drainage problems in the reserve, an amendment was made to the Navy Appropriation Act for the fiscal year 1921, and as finally approved on June 4, 1920, was the charter of the Navy's powers with respect to the reserves for 18 years until amended by act of June 3, 1938 (c. 851, 52 Stat. 1252).

The unit contract between the Standard Oil Co. and the Navy was entered into on June 19, 1944, under the authority of the act of June 17, 1944 (c. 262, 58 Stat. 280, 34 U. S. C. 524), which further amended the act of June 4, 1920, as amended by the act of June 3, 1938.

The first recorded statement of a naval policy relating to conservation of oil in the ground in the naval petroleum reserves was made by the Secretary of the Navy in a letter dated June 2, 1915, addressed to the Attorney General, in which it was stated:

"In reply to your letter of June 2, 1915, in regard to policy that this Department advocates in regard to the naval petroleum reserves, you are informed that this Department considers that it is of the utmost importance that there be retained under Government control a proven oil-bearing area that may be reserved for the use of the Navy, with the oil remaining underground in the natural reservoirs of the earth protected from loss by fire and evaporation, and stored without cost, until sometime in the future when the reduced production and increasing price of oil render it advisable to produce oil for the Navy from this area."

The above-quoted policy remained unchanged throughout the years to the passage of the act of June 17, 1944 (34 U. S. C. 524). In Report No. 1529 on H. R. 4771, May 29, 1944, the Committee on Naval Affairs, House of Representatives, stated:

"The central purpose of the bill is to clarify and define the powers and authority of the Navy Department in the administration of the 4 petroleum and 3 oil-shale reserves heretofore set aside for the use and benefit of the Navy.

"The Navy Department's position has been that its powers must be commensurate with its responsibility for the carrying out of the congressional policy

In Senate Document No. 187, May 2, 1944, entitled "History of Naval Petroleum Reserves," submitted in connection with S. 1773, it was stated:

"The Navy's basic policy with respect to the reserves is now, as it has been in the past, that there shall be the maximum conservation of oil consistent with the needs of the national military and naval security. The Navy has regarded itself as charged by the Congress with the responsibility for maintaining its present holdings of oil lands as a reserve of oil in the ground and for restricting the production of oil to those occasions when it is vitally required."

The aforementioned policy was restated in the unit plan contract of June 19, 1944, between Standard Oil and the Navy in which the recitals state in part: "(6) (d) The unit plan of development and operation as set out herein will: "(i) afford Navy a means of acquiring complete control over the development of the entire reserve and the production of oil therefrom in order that Navy may protect the reserve and conserve in the ground all of Navy's share of the oil in the reserve as well as a substantial portion of Standard's share of oil in the reserve. "(iii) place the reserve in a condition of readiness whereby it will be able promptly to produce oil in substantial quantities whenever the strategic situation of the United States in the future may so require."

Now, Mr. Secretary, I want to ask you this question

The CHAIRMAN. Before the gentleman from Georgia asks his question, the Chair would like to state at this point for the record that he is very happy that the gentleman from Georgia has taken time to read this brief but rather clear history of the background of this problem, and through all these years the distinguished and able former chairman of this committee, Mr. Vinson, has lived with this problem. He has been a faithful watchdog and has jealously guarded at all times the Government's interest in these reserves.

And I surmise the reason he has taken these few minutes this morning is that he is looking ahead into the future, even after he leaves Congress and after he shuffles off this mortal coil, he wants to make it clear and have the record for other men who shall follow us in the years to come to see what the clear intent and purpose of the Congress is.

I think I owe that to the gentleman from Georgia, and that the country is indebted to you. I think I have read your mind.

Mr. VINSON. Don't soften me up too much right now.

The CHAIRMAN. But I think I read your mind.

Mr. VINSON. I think it is highly important for the Secretary, who probably is not so familiar with this as some of us are, and the other members of the committee to sort of get a little background of this whole situation.

Now, Mr. Secretary, this is the question: Now, you bear in mind what we were doing, and what was in the mind of Congress. Now, my question for the record is this:

Mr. Secretary, is the proposal now to increase production 18,000 barrels a day in accordance with the policy heretofore announced by the Congress to conserve the oil in the ground?

Secretary ANDERSON. First, I should like to say to the distinguished Congressman that I will be most happy to give you my reassurance that the congressional policy which you have outlined will be the policy which the Navy will continue to follow.

In direct response to your question, I think it is consistent with the position which the Congress has traditionally taken, because in view of all of the information which we have at hand we do face the very present possibility of oil being entrapped by the encroachment of salt water, but in order to as nearly as possible subscribe to the policy of