STATEMENT OF CAPT. H. A. STUART, UNITED STATES NAVY, DIRECTOR OF NAVAL PETROLEUM RESERVES

Captain STUART. Mr. Chairman, the bill as written by Mr. Hobbs has been endorsed by the Navy Department, the Department of the Interior and the Department of Justice in preference to the O'Connor bill; and I would also like to call your attention to the fact that this Hobbs Resolution is a resolution establishing a naval reserve and not a public-lands resolution. Its administration would be under the Secretary of the Navy, and according to the act of June 30, 1938, and not under the act of February 25, 1920, the so-called leasing bill. So that Mr. Trammell's question would not come into the picture. Whatever rights they have under the bill as proposed by Judge Hobbs would apply in conjunction with the administration under the act of June 30, 1938.

Then there is the question of drainage. We feel that, as Mr. Michener said, you are not especially interested in drainage questions, because you are interested in the legal questions. We feel that drainage is exaggerated, very much exaggerated, but if it is declared to be United States property, the problem becomes a Government one, and we will have to solve it, and we feel that we can.

There is bound to be drainage. If there is a well in an oil pool, of course, there is drainage, but Mr. Warren an Mr. Johnson also spoke of drilling off-set wells to counteract drainage. I do not think that Mr. Johnson means "counteract," he means to compensate them for the oil that the private interests are getting; and the further out you go, the more you will drain. Everybody knows that. You have got to work out the problem some other way.

I would also like to remind you that the Teapot Dome and the Elks Hills leases were made ostensibly for drainage reasons-not reasons, but excuses, and it took 5 years to overcome those difficulties, and we have the same problem here.

Mr. TOLAN. Mr. Stuart, could I ask you this question: How many acres of reserve oil land has the Navy Department today?

Captain STUART. There are about 30,000 acres in reserve No. 1, about 9,000 acres in reserve No. 2, both in Kern County, Calif., and about 9,000 acres in Teapot Dome. And I think that there are about 35,000 square miles in reserve No. 4, which is inside the Arctic Circle. Mr. TOLAN. Has any estimate been made of the amount of oil that is contained in that acreage?

Captain STUART. Yes, sir; there is Teapot Dome, probably about 17,000,000 barrels there; that is reserve No. 3; and in reserve No. 2, which is in Kern County, Calif., there are probably 47,000,000 barrels in the upper sand, but we do not know what is in the lower sands. In reserve No. 1, which adjoins No. 2, also in Kern County, Calif., there is a moot question as to how many barrels there are. There may be 500,000,000 barrels and there may not be more than 200,000,000. We do not know.

But we had this bill passed last year, this act of June 30, 1938, which gives us authority to go ahead and try to find out how much is in this reserve.

Mr. TOLAN. Captain, in terms of years, how many years do you think that it would take you to exhaust that supply that you now have on hand?

Captain STUART. I could not answer that unless we know how much we have. We use in peacetime from eight to nine million barrels a year, but in wartime that jumps away up.

Mr. TOLAN. The reason that I asked the question-and I want to be fair with you, Captain-is that when I was out there and looked over those oil lands I was with some Navy officials, and it was estimated to me, when they talked to our group, that there was enough oil there sufficient to last for 125 years. Do you agree with that?

Captain STUART. No, sir.

Mr. TOLAN. How long would you say, under the present consumption?

Captain STUART. You mean in peacetime or wartime?

Mr. TOLAN. Peacetime; now.

Captain STUART. Oh, perhaps 20 years. That is just a guess.

Mr. TOLAN. Now, is it a fact that there are thousands and thousands of acres that the Federal Government owns now designated as public lands in which there is oil in a part?

Captain STUART. I do not know of any; no, sir.
Mr. TOLAN. You do not?

Captain STUART. No, sir.

Most of that is covered by permit, and I do not know of any area which you can reserve, or which you can make into a reserve.

Mr. TOLAN. Do you know the number of barrels of oil, how many barrels of oil, are on hand today in this country that is surplus oil? Captain STUART. I would say probably 5 months' supply. We use a little over a billion barrels a year, 1,200,000,000.

Mr. TOLAN. The figures are given of about 14,000,000,000 barrels of surplus oil today and about 1,200,000,000 barrels used every year. Would you agree with that?

Captain STUART. That is as good a guess as any.

Mr. TOLAN. There is no guess as to what they have on hand today. Captain STUART. Under ground it is quite a problem. It is all a guess as to what is under ground; different people will give you different estimates.

The American Petroleum Institute came out the other day with an estimate of 17,300,000,000, and I think that the Bureau of Mines' estimate is probably around 14,500,000,000, but the difference between those two is only 2 years' or more supply, and the oil isn't being formed very rapidly, and the amount used each year is increasing right along.

It is true that the methods of extracting oil are improving, too, but it is not being formed, so it is not limitless. One year you may have an increase in your reserves and the next year it is liable to be down, and as long as it is not being formed rapidly, everybody knows that it isn't being formed at anything like the rate of production. It takes millions of years on that proposition-in the forming of oil. Mr. TOLAN. I have just a brief question, and then I want to thank you for answering my questions, but I have just one more question. I want to read this from the State College of Pennsylvania.

The petroleum industry each year uses 1,200,000,000 barrels of the 14,000,0000000 barrel reserve of crude oil, but at the end of the year there is just as much known oil in the United States, says Dr. Pearson, declaring that the petroleum industry does not live on its reserves but on its new discoveries. Dr. Pearson scoffed at the predictions that the supply of crude oil in the United States would be exhausted in 10 to 14 years.

Do you agree with that statement?

Captain STUART. No, sir. You do not know from year to year how much it is going to be.

Mr. TOLAN. Thank you.

Mr. MURDOCK. Thank you very much.

STATEMENT OF LESLIE C. McNEMAR, SENIOR ATTORNEY, JUDGE ADVOCATE GENERAL'S OFFICE, UNITED STATES NAVY

Mr. McNEMAR. I wish to state in connection with the case of the United States v. Mission Rock Co., that if you follow the decision a little further you will find that President McKinley, in his Executive order referred to, only requested so much of the land as the Supreme Court granted. In other words, he made a definite request, and the Supreme Court granted only what was requested, and they said that if the United States had wanted more, obviously they would have requested more, which is the reason why that case stands out differently from the rest. It is not an authority under any circumstances as to the ownership of the submerged lands by anybody.

Each one of these cases must be examined on its merits, and each one of these cases must be applied in accordance with its particular decision. I submit, sir, again, that the question before this committee in this resolution, and it is not such a narrow question at that, has never been adjudicated by the courts of the United States.

Much concern has been given here to decisions arising out of the subject of tide lands, and it has been stated that tide lands and submerged lands are all the same. Obviously that is not correct. We are talking about submerged lands under the 3-mile zone of the territorial waters. That is what this resolution applies to, and all of these decisions and practically all of the discussion that we have had here during the past 2 days have been beside the point, and not on the question which we have before us.

Now, let me make another statement: This resolution is eminently fair. If there are any rights of anybody, and if anyone has any rights, even including the State of California, in these territorial waters, this resolution protects them.

The CHAIRMAN. Do you contemplate that if this resolution passes, that it will add to or make any shift in the advantage in the contest as to the ownership?

Mr. McNEMAR. It might in this respect, certain powers of the United States as given under the Constitution are dormant powers until asserted, but any time those powers are asserted they are no longer dormant. The fact that these powers are dormant does not mean that they are not there.

The CHAIRMAN. Could any bestirring of a dormant power affect the constitutional requirements in this instance? If not, what dormant power do you have in mind that could be made vital and bestirring which could influence the determination of the court, if there can be no shifting of the advantage in the contest as to the ownership?

Mr. McNEMAR. In order to get this case before the courts, as we understand it, it is necessary for an assertion of policy to be made, and this assertion must be made by the Congress of the United States

because the Constitution states that Congress is the power that regulates and disposes of territory.

This is a territorial question.

The CHAIRMAN. You cannot put in issue the question of the right of this Government to take this oil for purposes of its Navy, unless there is some action by the Congress that precedes the suit?

Mr MCNEMAR. We think so.

The CHAIRMAN. Why?

Mr. McNEMAR. For the reason that in this case we are asking that these petroleum deposits be taken over and reserved for the Navy. Now, that is a disposition of the territory or property of the United States, and in order to dispose of that territory in a constitutional manner, the Congress of the United States has to act, and without this action by the Congress, I do not see how we can possibly get the matter into the courts in a constructive manner; although I may learn some law later on the subject.

The CHAIRMAN. We hope that some of us will, because we are a bit mixed up in it. If the committee does not mind, I think that we might continue on this question, which seems to be the heart of that controversy, that the captain is speaking on right now. That is the heart of it, it seems to me.

Mr. McNEMAR. That is the proposition as I understand it, and I think that I understand it pretty well and pretty fully. That is the proposition that Judge Hobbs has presented before this group, and that is the proposition that the Navy stands for in this case, and the conversations here during the past 2 days have gotten us far afield from that proposition.

The CHAIRMAN. You are speaking now to that thing which constitutes the heart of the question, and the central difficulty.

Mr. MCNEMAR. And my only purpose in coming back here in rebuttal is to bring back to the attention of this committee the subject that is actually before it, and from which all of this discussion has so far digressed during the past 2 days.

Mr. GWYNNE. What are some of these dormant rights that have been reserved or given life by the Congress? What do you mean by that?

Mr. McNEMAR. Any one of the rights which the Constitution of the United States confers upon the United States Government may lay dormant in connection with the 3-mile belt or in connection with any of those things which the Government may do when it exercises these powers, and the only way that it can exercise these powers is through a declaration by the Congress.

Mr. GWYNNE. Can you give me an illustration of what you mean? Mr. McNEMAR. The State of Delaware built a dam across a stream and a vessel trying to go up that stream, thinking that the State had no right to build that dam, collided with the dam and when an action was brought against the vessel in trespass, the vessel defended upon the ground that this was a matter of navigation over which the Congress of the United States had exclusive control under the Constitution, and therefore the State had no right to build this dam.

But the Court said that until the Congress of the United States regulated that problem, on that particular stream, that power of the

United States was dormant and the State had a right to build that dam.

The CHAIRMAN. Right on that point, if you will permit me, I think that that is a clear illustration. Now, in that situation, that is a condition where the Federal Government has the control of navigable streams, but had never declared this stream to be navigable or never assumed or undertook to develop it as navigable, is that not correct? Mr. McNEMAR. Yes, sir. It might have been a navigable stream at all times, but the Government, through the Congress, may not have taken any particular action in that regard, and until it does the State may build the dam. After the dam was built Congress could still require it removed.

The CHAIRMAN. I think that we understand the principle, but here is the Federal Government that is given the power and charged with the responsibility of maintaining a Navy, and under modern conditions a modern Navy has to have oil and gasoline. Now, then, there is some gasoline out there that you say either belongs to nobody or belongs to the Government?

Mr. MCNEMAR. That is right.

The CHAIRMAN. Now, then, having a Navy, and charged with the responsibility of maintaining it, and having some sort of ownership or jurisdiction with reference to the thing necessary to operate the Navy, why cannot it appropriate it?

Mr. McNEMAR. You mean why cannot the Federal Government appropriate it? It can do so through the Congress. But it is only the Congress that is authorized to dispose of things of that kind, and that is the reason we are here calling for this resolution.

That will be the assertion of the power of the United States in this connection, and when that is done then the whole matter will be brought up before the courts for proper determination. And when they say that it will take 10 years to decide this question, such a statement is foolish. The question can be decided inside of a year.

The CHAIRMAN. There are a lot of foolish things done around here, but let me ask you this question: If you had an allocation of that oil to the Navy Department without anything else being done, or an act of Congress allocating to the Federal Government any oil which the Federal Government has, or has a right to have, along that coast line, would you have to have anything else additional done in order to give you the right to protect your interest?

Mr. McNEMAR. You mean if the Congress of the United States gave us that oil under the circumstances you have outlined?

The CHAIRMAN. That is right, set the oil aside, or set any oil aside that you might happen to have in that area for a Navy reserve. Would you have to have anything more?

Mr. McNEMAR. I do not think so.

The CHAIRMAN. I do not mean this in any critical sense, but why did you not pursue the ordinary course of asking the proper department or the proper committee of Congress to allocate to you that oil? I am just trying to get that straight.

Mr. MCNEMAR. The reason that was not done, I am informedbecause I was not consulted at that time-is that if this were purely a question of a reservation of an oil reserve on public lands which have already been determined by the Congress to be public lands,