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planning, a great improvement in present operating methods and practices, and will require a sufficient and sustained demand for crude oil high enough to justify the high cost of a barrel of tideland oil.

These are some facts to be taken into consideration in the formulation of any policy that is intended to bring about the further exploration and development of potential and proven tideland oil reserves. Thank you.

(The map referred to by Mr. Kaveler is herewith inserted.)

Mr. GOSSETT. How many wells has your company drilled in the Gulf area?

Mr. KAVELER. Mr. Gossett, on the table accompanying the map, it shows my company has not completed under its own operations any producing wells. We have three wells actively drilling now, but my company has partnership interests with Kerr-McGee and that company has drilled a total of 10 wells. We are partners with them.

Mr. GOSSETT. Did I understand you to say six wells have been completed?

Mr. KAVELER. Yes, sir; and there are 30 wells now drilling in the Gulf. Of the 30 wells now drilling, 13 are classed as wildcats and 17 are classed as wells being drilled to develop pools after their discovery. Mr. GOSSETT. Of these 56 wells, how many of them were producers? Mr. KAVELER. Twenty-six of the fifty-six were dry.

Mr. FELLOWS. What effect did this Supreme Court decision have upon this industry?

Mr. KAVELER. I am an engineer and not a lawyer, so I would hesitate to answer the question except to say to you generally, I gather from what others in my company say, the effect of the Supreme Court decision, of course, is to delay all work until some clarity is brought about.

Mr. GOSSETT. Well, you know that yourself, do you not?
Mr. KAVELER. Yes, sir, I know that myself.

Mr. GOSSETT (presiding). Thank you very much.

Mr. GEE. Mr. Chairman, the last witness we wish to present takes into consideration all these hazards and risks which have been so ably described to you by the previous witnesses and he is going to describe further to you the reason why we need our title question settled and the type and character of lease that the off-shore operator should have in order to carry on the best possible operation in that area. We have selected Mr. Hines H. Baker who is president of the Humble Oil & Refining Co., of Houston, Tex., who will deal with that broad subject. If Mr. Baker is ready now, we would like for him to be heard.

Mr. GOSSETT. As I understand, you, you would like to conclude your hearings at this time.

Mr. GEE. That is right.

Mr. GOSSETT. We will sit until you conclude. Go ahead, Mr. Baker. STATEMENT OF HINES H. BAKER, PRESIDENT, HUMBLE OIL & REFINING CO., HOUSTON, TEX.

Mr. BAKER. As has been stated, I am Hines H. Baker. I am president of the Humble Oil & Refining Co. I have been with the company for about 30 years and have been in the oil business about that period of time. I am a lawyer by profession. I served for 17 years in that

capacity with the Humble Co. and in 1937 I was transferred into administrative work and became a director of the company and have had administrative and executive jobs until my present assignment.

The Humble Co. is one of the large domestic producers of oil. It is producing in the southern part of the United States, extending across the continent from Florida through Louisiana and Texas, to California. We have had considerable experience in these off-shore operations, having leases both from Louisiana and Texas.

You have before you two bills, H. R. 5991 and H. R. 5992, which as explained are the results of considerable discussion and negotiation. Many of the provisions of these two bills are identical but in certain important respects they are different.

Broadly speaking there are four primary and important differences between the two bills. The first of these is in the provisions for the management of the so-called marginal belt. The second is in the provision for the disposition of the revenues from the marginal belts, and from the Continental Shelf beyond. Those two differences have been covered by the representatives of the States in their testimony before the committee.

A third principal difference lies in the provisions regarding the validation or exchange of leases issued by the coastal States, and in the disposition of the lease rentals, bonuses, and revenues derived from those leases and production under those leases.

The fourth principal difference lies in the provisions regarding the leasing policy, or the leasing provisoins, for that portion of the continental shelf that may be administered by the Federal Government. It is these last two differences that I would like to discuss before the committee. I have a formal prepared statement which I would like to file with the committee and invite you to read it and consider it; but, because of the limited time involved, I will not undertake to read that paper, but will read some parts from a portion of it. I would like to discuss extemporaneously with you the two primary matters that I think are of particular importance in the consideration of the relative merits of these bills.

Mr. GOSSETT. Without objection, the formal statement will appear in the record at the conclusion of your extemporaneous remarks.

Mr. BAKER. The first thing is what shall be done with these leases that have heretofore been issued by the coastal States on the submerged land, as described by the witnesses that have preceded me.

The States of California, Florida, Texas, and Louisiana have issued a great number of leases covering wide areas. These leases in California and Florida were all issued prior to the decision of the Supreme Court in the California case on June 23, 1947.

The States of Texas and Louisiana issued leases over considerable areas, prior to the decision in the California case, but they have also issued leases covering a wide area since the decision in the California case. In fact, the State of Texas has since issued leases covering better than 364,000 acres, for which they have received a bonus of better than $7,000,000,000. The State of Louisiana has since issued leases totaling more than 1,000,000 acres, and has received more than $16,000,000 in bonuses from those lands that have been leased subsequent to the decision in the California case.

In addition to these heavy bonuses, the operators have paid heavy lease rentals, particularly to the State of Louisiana, and have carried

on the development operations that have been described here by the previous industy witnesses, at great expense to the companies, and are now engaged in extensive, highly hazardous, and expensive operations on those properties under the leases granted.

Mr. GOSSETT. Mr. Baker, under H. R. 5992, the date makes this division in the acounting to be subsequent to the Supreme Court decision.

Mr. BAKER. I am just coming to that point.

Mr. GOSSETT. If that bill were enacted, then both the State of Louisiana and the State of Texas and the lessees from those States would have a considerable accounting job to make to the Federal Govern ment; would they not?

Mr. BAKER. Yes; they have a very difficult situation.

Mr. GOSSETT. It would involve a determination of what was in the Continental Shelf and in the tideland area, and also a matter of how much the companies owed and how much the States owed and so forth?

Mr. BAKER. Yes. I would like to describe that situation, too.
Mr. GOSSETT. Go right ahead.

Mr. BAKER. Both these bills recognize that there are certain rights in the operators which they respect. H. R. 5992 provides for the exchange of Federal leases for State leases on the entire submerged area outside of the inland waters granted prior to June 23, 1947, the date of the decision in the California case.

It also provides for a waiver by the Federal Government of any claim for rentals or royalties or revenues of any kind arising out of operations prior to that date.

That would cut off any rights in the States or in the lessees from the States on all leases that have been issued subsequent to June 23, 1947, and would include that large volume of acreage that I mentioned awhile ago; and it would mean that, unless satisfactory arrangements were made with the Federal Government on any portion that might be allocated to the Federal Government, these lessees would lose their leases and all of their investments heretofore made in those properties.

H. R. 5991 validates all of the State leases in the marginal belt that have been issued prior to January 1, 1949. In other words, those leases will continue in effect, because that bill provides that the States shall have the management of the properties within the marginal belt.

The bill then provides for the exchange of Federal leases for State leases in the area beyond the marginal belt, where those leases were issued prior to January 1, 1949. There have been no leases issued subsequent to January 1, 1949. Therefore, H. R. 5991 either validates or provides for the exchange of all leases that have been issued by the States. It also provides there shall be no accounting to the Federal Government on account of any revenues that might have been derived prior to the effective date of the act.

Those are the primary differences between the two bills on this point. It seems obvious to us that H. R. 5991 is a more sound approach to a solution of this problem than is H. R. 5992, and that there are good legal, equitable, and practical grounds in support of those provisions. I would like to devote a little time to the discussion of that question, because I think it is an important one. I would like to call attention