I have read the record in the previous hearing-that is, on the Gillette bill-and it appears that the enactment of this measure, which I assume is similar to the Gillette bill, would result in increased cost to our industry for the petroleum products we buy. It is a fundamental, economic fact that the building of any marketing or other organization entails considerable initial expense. Disintegration only means displacement of present organizations that have been built up over years. The building of new organizations would entail additional expense. It may be assumed that when an integrated industry is disintegrated the cost of operating its component parts is increased. That cost is not absorbed by the corporation itself but is passed on to the consumer.

If these oil companies are deprived of their marketing activities, we assume that they will still make what profit they are making today on their production, refining, or transportation activities. There would be the additional profit to be made by the agencies having the marketing activities. And this additional profit would have to come from the pockets of the consumer-from our pockets, if you please.

We are apprehensive about any measure that would tend to increase our cost. This industry-the for-hire branch of the trucking industry-operates on a very narrow profit margin. Figures have been compiled showing the percentage of profit per dollar of gross business in the common-carrier trucking industry. Motor carriers are service industries, not investment industries. On the average, the profit ratio to gross business does not exceed 2 percent. That statement can be verified from records of the Interstate Commerce Commission. Some small companies rendering a specialized service, may earn as much as 5 percent, or perhaps a little more. The larger companies, however, are below 2 percent. Now, that sounds odd, but the smaller man makes more money for the simple reason that the smaller man specializes, as a rule, whereas the larger company has to increase its supervision and runs into a great deal of minimum shipments, as it were, where the rate may be the minimum rate, but he has the clerical work, the pick-up and delivery, on those small packages that do not go to the small man; they go to the several large companies. We have analyzed the returns from 44 to 46 percent of their shipments moving in minimum lots, of the larger ones, which you do not find in the smaller. Anything, therefore, that would tend to increase the cost of doing business in the trucking industry would be immediately felt and reflected in a lower net profit.

This situation is all the more serious to us because of the fact that a large part of our industry is under regulation. Our rates are fixed by State or Federal commissions, insofar as the higher branches are concerned, and it has always been axiomatic that it is easy to reduce a rate before a regulatory body, but most difficult to increase it. It is not easy for the members of our industry to adjust their business quickly to absorb increased costs.

I believe this committee should take cognizance of the fact that approximately 40 percent of all taxes collected by the States comes from taxes on motor vehicles. These taxes on motor vehicles have gone largely to build up our splendid system of highways. There fore, anything that would tend to decrease the amount of revenue forthcoming from motor vehicles would be felt by the States.

Just as a few examples, the State of Georgia collects 73 percent of all its taxes from motor vehicles. The State of Indiana collects 44 percent; the State of Massachusetts 34.3 percent; the State of Nebraska 72.6 percent; the State of New York 27.3 percent; and the State of Vermont, the highest of all, 86.1 percent.

It is apparent that many of the States would feel any cut in that

revenue.

Mr. HEALEY. That is inclusive of all taxes?

Mr. LAWRENCE. That is the share of all taxes.

Mr. HEALEY. So the State of Vermont receives 86.1 percent of all of its taxes from motor vehicles?

Mr. LAWRENCE. From motor-vehicle taxes; yes, sir. It is significant that since 1920, during which time the price of gasoline dropped over 50 percent, we have seen the greatest development in road building and automobile production and use. When we realize that 1 out of every 7 persons gainfully employed in this country earns his livelihood from the automobile or its allied industries, we can appreciate the tremendous effect that these comparatively new industries have had on the recent life and prosperity of this country. This committee, no doubt, knows that in foreign countries, where the price of gasoline is high, automotive use is curtailed and, as a result, those countries do not enjoy the industrial prosperity that this country has enjoyed for so many years.

In that connection I think it was brought out the first day, on Wednesday, in the testimony that in the passenger-car field one out of every four cars was owned by a person or persons with incomes less than $20 a week.

During my experience in this business I happen to have been in 47 different countries, and it was quite apparent from study, and so forth, there that the biggest drop in motor-vehicle ownership, motorvehicle operation, came in the initial raises above, you might say, what the price in this country was for gasoline. It had lesser effect as it reached high levels for any additional cent or two added. The same thing is true, and more true, in the matter of freight movement. Under our national motor freight classification we handle eightysome-odd-hundred commodities, but there are hundreds of those, many of them materials that never moved before until the motortruck came along, that would be in difficulty in the movement-that is, they would not move as they do today if transportation costs rose to any considerable extent. And fuel is a very important part of our

costs.

In the record of hearings on the Gillette bill, both sides indicated that a few companies at least did engage in competition bordering on the unfair. It was not established that this was entirely the result of integration, however. Revolutionary legislation of this sort is not the cure. One does not shoot a good bird dog because it has fleas.

In brief, our position is that we, the members of the trucking industry, as consumers of petroleum products, oppose any move that would tend to increase the price of those products. We urge that the committee report unfavorably on the bill in its present form. Mr. Chairman, I very much appreciate your courtesy.

Mr. HEALEY. The next gentleman is Mr. Hunter, president of the Mid-Continent Oil & Gas Association.

STATEMENT OF J. C. HUNTER, PRESIDENT OF THE MID-CONTINENT OIL AND GAS ASSOCIATION, ABILENE, TEX.

Mr. HUNTER. Mr. Chairman, my name is J. C. Hunter, independent oil producer, Abilene, Tex. I am president of the Mid-Continent Oil & Gas Association.

Mr. HEALEY. You are an integrated company?

Mr. HUNTER. This is a trade association. The Mid-Continent Oil & Gas Association, which has its headquarters in Tulsa, Okla., is an association of producers of crude oil in six Southwestern States, namely, Kansas, Oklahoma, Arkansas, Louisiana, Texas, and New Mexico, and functions through three divisions-namely, the KansasOklahoma division, the Texas division, and the Louisiana-Arkansas division, and through its general board of directors. Each of these divisions has a separate board of directors and its own officers. In addition, the Mid-Continent Oil & Gas Association has a general board of directors and officers on which are represented all of the divisions. The membership of the Mid-Continent Oil & Gas Association consists of approximately 2,600 individuals engaged in oil production. While the membership in numbers is predominantly composed of independent operators, the association also has in its membership representatives of the larger oil companies. The great preponderance of the membership are independent operators, and the great preponderance are engaged solely in production, and the organization deals with these questions upon which there is no substantial controversy within the industry.

The

The purposes of the association are to deal with all matters affecting the welfare of the producing branch of the oil industry in the territory in which its divisions are located provided such activities are confined to matters which are noncontroversial in character. question whether a subject falls within the scope of the association's activities as noncontroversial is, of course, determined by discussion and action on the part of the association's directors.

Two proposals which would vitally affect the oil producers who are members of the association have been recently considered and acted upon. The first is the proposal to divorce the marketing of petroleum and its products from production, refining, or transportation and the second is the proposal to divorce crude-oil pipe lines from their affiliated companies.

We understand that H. R. 2318 is intended to be confined to the divorcement of marketing and does not deal directly with the divorcement of crude-oil pipe lines. However, the sponsors of H. R. 2318, we understand, are also sponsoring divorcement legislation with respect to crude-oil pipe lines and that subject is embodied in a bill now pending in the Senate.

On this question it has been determined by the organization through its regular channels and methods of determination, that it is a proper subject for our association to express a position upon. That method of determination is to go back through our organization to our board of directors and to our members and discuss and act upon the matter. That was done in this case, and there was

practically a unanimous vote; in fact out of 76 members there was only one dissenting vote in the whole group on the question.

Under these circumstances, both proposals have been considered by our board of directors and, because they are relating and have a common sponsorship, I am embracing in this statement the action. taken by our directors on both subjects.

It is the practice of our association, where prompt action is required and it is not immediately convenient to hold meetings, to have resolutions adopted by a steering committee of our general board of directors and then forwarded to the entire membership of the board for study and action by letter ballot.

That procedure was followed in the adoption of the two resolutions hereinafter set out in full:

RESOLUTION REGARDING MARKETING DIVORCEMENT

The board of directors of the Mid-Continent Oil & Gas Association, representing all branches of the petroleum industry in the Southwestern oil-producing States of Kansas, Oklahoma, Arkansas, Louisiana, Texas, and New Mexico, has had brought to its attention that certain proposed measures, purportedly designed to divorce the businesses of production, refining, and transporting of petroleum products from that of marketing petroleum products, are now before the Congress.

After deliberate study of these proposed measures, the board of directors of the Mid-Continent Oil & Gas Association, acting through its steering committee in special meeting assembled, hereby resolves that it protests and opposes the enactment of any legislation which has for its purpose the divorcing of the businesses of production, refining, and transporting of petroleum products from that of marketing petroleum products.

The board of directors of the Mid-Continent Oil & Gas Association, acting through its steering committee in special meeting assembled, further resolves that the president of the Mid-Continnent Oil & Gas Association is empowered and directed to take such steps as he may deem proper and necessary to inform the Members of Congress concerning this resolution of protest.

RESOLUTION REGARDING PIPE-LINE DIVORCEMENT

The board of directors of the Mid-Continent Oil & Gas Association, representing all branches of the petroleum industry in the Southwestern oil producing States of Kansas, Oklahoma, Arkansas, Louisiana, Texas, and New Mexico, has had brought to its attention that certain proposed measures, purportedly designed to prohibit interstate common carrier pipe lines from transporting commodities in which such carriers have any interest, are now before the Congress.

After deliberate study of these proposed measures, the board of directors of the Mid-Continent Oil & Gas Association, acting through its steering committee in special meeting assembled, hereby resolves that it protests and opposes the enactment of any legislation which has for its purpose the prohibiting of interstate common carrier pipe lines from transporting commodities in which such carriers have any interest.

The board of directors of the Mid-Continent Oil & Gas Association, acting through its steering committee in special meeting assembled, further resolved that the president of the Mid-Continent Oil & Gas Association is empowered and directed to take such steps as he may deem proper and necessary to inform the Members of Congress concerning this resolution of protest.

On May 27, 1939, as president of the Mid-Continent Oil & Gas Association, I submitted the resolutions quoted above to the board of directors of the association for their approval or disapproval. I have received a certificate from the secretary of the association stating the results of the tabulation of the vote as follows: Total membership of board, 76; resolutions approved by 75, disapproved by 1.

In accordance with the terms of the resolutions under which as president of the association I am empowered and directed to take such

steps as I may deem proper and necessary to inform the Members of Congress, I am respectfully presenting this statement to this honorable committee.

Without presenting in detail an extended argument and list of reasons in opposition to the proposed legislation, I call your attention and emphasize that the passage of this legislation is opposed, practically unanimously, by both large and small operators engaged in the oil industry in the midcontinent area where a large percent of the crude oil of the United States is produced. They believe that such legislation would be expensive, disrupting, and harmful in the orderly and efficient production, transporting, refining, and marketing of crude oil and its products with consequent increased cost to consumers and inevitable inconvenience and financial loss to the oil operators in that part of the country.

All of us, I think have heard the story about the distinguished late President, Calvin Coolidge, when he went to church one Sunday and left Mrs. Coolidge at home. When he returned she asked him about the sermon and what was the text. He told her that the preacher took as his text "Sin." She asked him, "What did he say about it?" And Mr. Coolidge answered, "He was agin it." Now, the oil industry in the midcontinent area has taken as their text the Harrington bill, and I was there and heard the sermon, and I am authorized to report to you that they are "agin" it.

I thank you, gentlemen.

Mr. HEALEY. Our next witness is Mr. Russell Brown, general counsel of the Independent Petroleum Association of America. Do you have a very long statement, Mr. Brown?

STATEMENT OF RUSSELL B. BROWN, WASHINGTON, D. C., GENERAL COUNSEL, INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA

Mr. BROWN. I think it will take me about 15 or 20 minutes, Mr. Chairman.

Mr. HEALEY. You have been here during some of the previous 'testimony?

Mr. BROWN. Yes; I have.

Mr. HEALEY. Then I will ask you to try to avoid repetition.
Mr. BROWN. Yes; I will do so.

Mr. HEALEY. There are many things that have come up in these hearings. They have been going for some time.

Mr. BROWN. I appreciate that, and while there will be some duplication in thought there will be no duplication in the type of representation.

I represent the Independent Petroleum Association of America, which is a producing organization of producers throughout the United States in all of the oil States. In addition to that, there are joined with me in this the following organizations:

Illinois-Indiana Petroleum Association, Kansas Independent Oil & Gas Association, Kentucky Oil & Gas Association, National Stripper Well Association, North Texas Oil & Gas Association, Oil Producers Agency of California, Oklahoma Stripper Well Association, Southern Oklahoma Oil & Gas Association, Western Pennsylvania. Oil Men's Association.