J. L. QUIMBY & Co.,

New York.

Hon. ARTHUR D. HEALEY,

House Office Building, Washington, D. C.

SIR: I wish to emphatically add my support to H. R. 2318, which I understand is to come up for your support on Wednesday.

As we see it, this legislation will benefit thousands of people in this line of business, so we are strongly in favor of same.

Yours very truly,

E. S. QUIMBY.

BUFFALO, N. Y.

Representative ARTHUR D. HEALEY,

Chairman of Judiciary Subcommittee:

H. R. 2318, divorcement bill, should be enacted if independent oil companies are to survive. Proration of crude oil together with pipe-line ownership by major oil companies and royalties from refinery patent allow a few large companies to enforce high crude-oil prices and high transportation rates, thus to gain large profits these are offset by operating refineries and merchandising units at a loss. The merchandising units maintain high resale prices with but very small spread for refinery operation. Thus all independent refineries are forced out of business because they cannot earn a profit. Jobbers and distributors are forced to buy major company products or go bankrupt. Monopoly becomes a fact. In New York State practically every independent oil company has been forced out of business or into buying the monopoly product. The divorcement bill will curtail such squeeze tactics and allow independent oil companies to remain independent.

HAMBLETON TERMINAL CORPORATION,
GEORGE HAMBLETON, President.

Mr. HEALEY. Now, have the proponents concluded their case?
Mr. HADLICK. Yes, sir.

Mr. HEALEY. That is all you wish to offer?

Mr. HADLICK. Except a few minutes in rebuttal.

Mr. HEALEY. Well, I think the committee will be disposed to permit you to do that.

Now, how about the opponents? If there is someone here who will take charge of the witnesses for the opponents—

Mr. EDWIN H. DUFF. I just want to call to your attention, Mr. Chairman, something in this bill that might affect the shipping industry generally.

Mr. HEALEY. You have a prepared statement?

Mr. DUFF. I have a statement here, yes, which might bring forth a few questions, but Captain Petersen and I will split it so that Captain Petersen can discuss the deep-tank situation with respect to drycargo vessels.

Mr. HEALEY. You may proceed with your statement. Will you state your full name and whom you represent?

STATEMENT OF EDWIN H. DUFF, AMERICAN MERCHANT MARINE INSTITUTE, NEW YORK CITY

Mr. DUFF. My name is Edwin H. Duff of the American Merchant Marine Institute, 11 Broadway, New York, which institute represents a cross-section of all merchant vessels of over 1,000 tons, engaged in all trades, offshore, intercoastal, and coastwise. It represents, perhaps, 49 percent of all the merchant vessels under the American flag. The institute is not desirous of injecting itself into any controversy that may exist as between the proponents and opponents of this proposed legislation. We know nothing as to the advantages and disadvantages that may accrue as a result of legislation of this character, but we are much concerned with respect to the conditions that we believe would arise affecting our industry if legislation were to be enacted that would have the effect of prohibiting a practice that has so long been in vogue in connection with the taking on of fuel oil for bunker purposes by vessels.

We feel that the phase of this subject in which we are interested is entirely apart from and disconnected with the marketing of petroleum and its products in the broad sense in which the term is generally applied. In other words, we feel that the subject being dealt with by this bill is more directly associated with the supplying of the products of petroleum to automobiles, service stations, household heating plants, and so forth. We say this because in connection with the latter, the distribution of oils is scattered very widely and involves perhaps millions of units, whereas with respect to merchant vessels, notwithstanding the fact that the total quanity involved is great and the fuel bill runs into millions of dollars, at most the total units served are necessarily limited. I believe the Maritime Commission has computed that the fuel bill of steamship lines required under the Merchant Marine Act to submit reports to that body amounts to something like $40,000,000 annually. That, of course, does not by any means approach the total figure, because it only comprehends certain American vessels and does not take in the many foreign vessels which take on bunker fuel at American ports.

As we construe the language of this measure, it would be unlawful for a refinery to deliver fuel oil direct to a vessel elsewhere than at the refinery. In other words, while it would be lawful for a steamship to dock alongside a refinery and have her fuel tanks filled with oil, it would not be lawful for that same oil company to send one of its oil barges into or across the river or bay and deliver fuel oil to the vessel while she is loading cargo at her own dock. As a matter of fact, vessels do not, except in exceptional instances, go to a refinery to take on their bunker fuel. The fuel is almost universally loaded into both cargo and passenger vessels while they are at their docks completing their loading, or in some few cases where a vessel may be anchored in the stream awaiting a berth to load or discharge. You will, of course, undertsand that to shift a large passenger or freight vessel from her dock to some other point where a refinery is located involves not only a considerable expense but an additional risk both to the vessel herself and to other shipping.

Depth of water: A large steamer requires from 6 to 10 or more tugboats to dock and undock her, and this can only be done at such

times as the tides are favorable and the congestion in the harbor is not great. The cost of the tugboats alone, I believe, is something like $35 an hour per tug, and a shipowner is not desirous of undertaking the risk of shifting a large vessel about from dock to dock where it can be avoided.

A very large majority of our merchant vessels today are oil burners and consume large quantities of oil. The supplying of bunker fuel to our ships in a large port such as New York requires some very highclass and expensive equipment in the way of specially constructed tank barges with the necessary pumps and equipment to carry on the operation. These vessels must comply with very comprehensive regulations prescribed by the Bureau of Marine Inspection and Navigation and doubtless constitute very costly equipment.

If there were to be a complete change in the present method of fueling vessels, there is little doubt in our minds that it would involve a considerable increase in the cost of the fuel oil supplied to ships. These tank barges would have to be provided by someone to take care of the needs of merchant shipping, and those now owned by the oil companies would either have to be acquired by a third party or new ones would have to be constructed to meet the needs. We do not, of course, know how this would work out-whether there would be a large number of small craft peddling oil which they purchased from refiners or whether substantial concerns would be created to take over the supplying of fuel oil which is now done by the refinery. When you take into consideration that merchant vessels consume oil at the rate of hundreds of barrels per day, you can see that an added cost of a cent or a fraction of a cent per gallon runs into a greatly increased cost of operation. What this increase would be, we do not know, but with the constantly mounting cost of operation, the shipowner finds himself confronted with very serious problems. Figures which have been obtained from the American Petroleum Institute-not including Army, Navy, and coastwise vessels-indicate a consumption of gas and fuel oil by vessels, as follows:

You can readily see, therefore, what a small added cost per gallon would amount to when you are dealing with as much as 80,000,000 barrels. The problem, therefore, to the shipowner is a serious one. The cost of fuel oil in the operation of a vessel is a major item, and the slightest increase in cost runs into millions of dollars.

We do not know what problems confront the marketers of petroleum products but feel sure that whatever they are, Congress will give due consideration to those conditions with a view to correcting any abuses that may exist, but the American shipowner hopes that in whatever is done by Congress in this connection, it will keep in mind not only the need for maintaining the merchant marine which we already have, but improving it, and that can only be done by avoiding increased costs of operation wherever possible. Regardless

of whatever the situation may be concerning the marketing of petroleum products in the general sense, we cannot see how any change so far as the present practice of fueling merchant vessels is concerned would be of benefit to anyone, but we can see where it could work a great hardship upon an already burdened industry which is confronted with many difficulties in keeping our ships in operation.

Mr. HEALEY. Are there any questions of Mr. Duff?

Mr. HANCOCK. You assume that after this bill is passed you will be permitted to go to the refinery and buy directly? I do not believe you will be. I think you will have to buy through a middleman.

Mr. DUFF. Well, I was under the impression that the initial sale could be made by the refinery, but it might be that the bill is so tight that we could not even do that.

Mr. HANCOCK. If the refiner sold directly to the shipowner, would not that be marketing?

Mr. DUFF. Well, I think under a strict interpretation of the act, it would be held to be marketing, and we would be excluded from even that privilege.

Mr. HEALEY. Do the ships get a special rate on fuel oil?

Mr. DUFF. There is a regular, fixed price for bunker fueling at the various ports. I think the price is now in the neighborhood of 95 cents a barrel.

Mr. HEALEY. That is the price, whether or not a large quantity is consumed or a small quantity?

Mr. DUFF. Well, it makes no difference, but in dealing with bunker fuel, of course, it is always a pretty large quantity.

Mr. HEALEY. I know that is true, but there are ships that require less fuel than others.

Mr. DUFF. Oh, yes; certainly.

Mr. HEALEY. Now, do the ships that purchase a lot of this fuel oil, do they get a discount?

Mr. DUFF. Not to my knowledge.

Mr. HEALEY. Do they get a lesser price than the others?

Mr. DUFF. Not to my knowledge. There is a fixed price for it. Mr. SPRINGER. In the event that this bill should pass and you would have to buy your supplies through a middleman, would that tend to increase your price, the price to you, or would it tend to decrease the price?

Mr. DUFF. We can only contemplate that somebody has to acquire this equipment which is now used, and it is expensive equipment. It comprises all necessary means for quick discharge, for fire protection, so as to enable the ship to permit the barge to lie alongside without affecting the insurance of the ship, and it is going to require somebody either to acquire that particular tank or barge or some other equipment, and it is going to take money, and we feel that inasmuch as even a small increase, as small an increase as half a cent or a cent a gallon adds so much to the cost of operating the ship that we fear that would creep in somewhere.

Mr. HEALEY. Thank you, Mr. Duff. glad to hear you, if you care to testify.

Now, Captain, we will be

STATEMENT OF WALTER J. PETERSEN, REPRESENTING THE PACIFIC AMERICAN STEAMSHIP ASSOCIATION AND THE SHIPOWNERS ASSOCIATION OF THE PACIFIC COAST

Mr. PETERSEN. Mr. Chairman and gentlemen, my name is Walter J. Petersen. I represent the Pacific American Steamship Association and the Shipowners Association of the Pacific Coast.

Mr. HEALEY. Where is your office?

Mr. PETERSEN. In San Francisco, Calif., I represent practically all the American-flag tonnage on the Pacific coast.

Without repeating anything that Mr. Duff has said, I would say to you that many of our ships must carry petroleum products, not alone for distribution in various ports of the globe, but for taking care of our Alaska fishing interests, for the use of their motor boats, and so forth, so that we must carry petroleum products in our vessels. As Mr. Duff has told you, we are required to maintain the strictest kind of regulations when we carry petroleum products. Our ships are provided, many of them, with deep tanks and double bottoms in which to transport petroleum products of various kinds. If this bill were enacted into law, we are very much concerned that we would be unable further to transport petroleum products, although we neither produce nor refine the same. So, to obviate the danger that this bill would provide, I am asking that an amendment be placed in the bill on page 3, line 10, after the word “products," insert the following:

Provided, That nothing in this act shall be construed to apply to dry-cargo vessels provided with deep tanks or double bottoms.

Mr. HANCOCK. Does that include all oil-burning vessels?

Mr. PETERSEN. Yes; that would include all dry-cargo oil-burning vessels. What we are concerned about, Mr. Hancock, is that our dry-cargo vessels are provided with deep tanks and double bottoms in which we transport petroleum products.

Mr. HANCOCK. Ás cargo?

Mr. PETERSEN. As cargo, or for the use of the vessel.

Mr. HANCOCK. As cargo for distribution or for the use of the vessel either?

Mr. PETERSEN. Yes. For instance, to illustrate, we might go down to Honolulu, where we have inland transportation. The vessel might have in its double bottom, in its tanks, a certain amount of petroleum products that might be utilized by the company for its own business down there, and in return they load those deep tanks with molasses. They have to pump all the oil out and put molasses in as part of our cargo-carrying capacity. We have to do the same way wherever we go, and if this bill were enacted into law we would be prohibited, although we neither produce nor refine-we will be prohibited from doing that.

Mr. HEALEY. What do you term "dry cargo"?

Mr. PETERSEN. A dry-cargo vessel is a vessel that carries all kinds. of dry cargo, general cargo, grain, or other commodities other than petroleum products.

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