S/SNSC Files: Lot 63D351: NSC 97 Series

Report to the National Security Council by the Executive Secretary (Lay)

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NSC 97

Note by the Executive Secretary to the National Security Council on a National Petroleum Program1

At the direction of the President the enclosed letter from the Acting Secretary of Defense on the subject has been referred to the Director [Page 490] of Defense Mobilization to develop a national petroleum program leading to the complete supply of Allied requirements, for consideration by the National Security Council.

James S. Lay, Jr.
[Annex 1]

The Acting Secretary of Defense (Lovett) to the Executive Secretary of the National Security Council (Lay)

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Dear Mr. Lay: In December 1948, the Secretary of Defense submitted a proposed National Petroleum Program to the National Security Resources Board (NSRB) requesting that the program, as proposed by the National Military Establishment, be considered by the NSRB and that appropriate action be taken with other government departments and agencies to implement a national oil policy. The immediate need for the formulation and implementation of a coordinated petroleum program was recognized by several departments of the government. The Foreign Petroleum Policy was under consideration by the State Department, and a National Gil Policy for the U.S. was under consideration by the National Petroleum Council, advisers to the Secretary of the Interior. These were in addition to the National Petroleum Program which had been coordinated and approved by the Military Establishment.

The National Security Resources Board advised the National Military Establishment that it would prepare a program incorporating the programs and policy recommendations of the State Department, Interior Department, and the National Military Establishment. This action was taken and submitted to the Interdepartmental Staff Group (ISG) for approval prior to submission to the NSRB. In June, 1949, the Secretary of Defense was advised by the Acting Chairman of NSRB that negotiations by the various departments in the ISG did not result in mutual agreement among the agencies concerned as to the necessity for a petroleum policy. It was further determined that no recommendation to the President on petroleum policy or the coordination thereof was necessary at that time, however, the representatives of the National Military Establishment did not agree to this determination. It had been determined, however, by the ISG that certain reference papers concerning the coordination of the U.S. Petroleum Policy which had been submitted, should be made available for reference purposes to the petroleum staffs of the various interested departments and agencies.

In the event of a major war in the future, there would be imminent danger that the Middle East sources of petroleum would be lost [Page 491] to the United States and its Allies. The military and economic costs of regaining even a portion of these resources, should that become essential, would be enormous. The military and diplomatic measures needed to hold that area, should its oil be vital to the entire war effort, would be most difficult to implement and uncertain to succeed.

The Department of Defense appreciates that measures necessary to insure independence of Middle East oil present difficult political, diplomatic, and economic problems and will become increasingly costly in future years. These measures, therefore, must be studied thoroughly, coordinated carefully, and justified completely. Such action would result in a National Petroleum Program.

Subsequent to the ISG determination (December 1949), discussions were held between the Under Secretary of Defense Stephen Early, Secretary of the Interior Oscar Chapman, Under Secretary of State James E. Webb, and Assistant Secretary of Commerce Thomas C. Blaisdell, Jr. It was agreed then that Secretary Chapman be made Chairman of a Working Group which would report to the National Security Council in the development of a National Petroleum Policy. However, no further meetings were called by the Dept. of Interior to discuss this policy.

Based on preliminary guidance as to the requirements of the U.S., Allied and Associated Powers provided by the Joint Chiefs of Staff for a war commencing in 1954, it appears that, in the geographic areas which would be available to such powers, an overall shortage in refining capacity of approximately 1 million barrels per day and in crude production of ½ Million barrels per day will exist at the outbreak of a major war.

The Joint Chiefs of Staff have consistently stated that a National Petroleum Program is necessary. Further, the present international situation has become increasingly acute, and at the same time, increased requirements of the Western Powers have made the problem even more immediate than it appeared when discussions on this program began in 1948.

The Department of Defense believes that a National Petroleum Program should be developed after careful analysis which should include, among other things, the relative economic costs of insuring adequacy of petroleum in the continental United States, now, in time of future emergency, and in a postwar period, as against the military costs of insuring its availability in the Middle East. This analysis and program will provide the Department of Defense with guidance it requires for strategic planning and development of military forces and budget. It is understood that the effects of implementing any particular phase of the program must be weighed against the strategic requirements before decision is made which might have a significant economic or [Page 492] other influence. In view of the foregoing, it is requested that an agenda item be prepared for discussion at the next meeting of the National Security Council in order to determine the necessity for a National Petroleum Program.

It is further requested that after discussion of this problem by the National Security Council, that the Petroleum Administrator for Defense be requested to take action to develop a program leading to the complete supply of Allied requirements. The attached draft of a letter to the Petroleum Administrator is submitted for your consideration.

Sincerely yours,

Robert A. Lovett

Draft Letter From the Executive Secretary of the National Security Council (Lay) to the Secretary of the Interior (Chapman)

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Dear Mr. Secretary: During the past two years, the international situation has become increasingly acute. At the same time, increased petroleum requirements of the Western Powers have made the early development of a National Petroleum Program a vital necessity to our national security.

The Department of Defense recently advised the National Security Council of a Joint Outline War Plan, currently under study, for a war assumed to commence on 1 July 1954. Preliminary estimates of the petroleum requirements of the U.S., Allied, and Associated Powers indicate that in the geographic areas which would be available to such powers, a deficit in refining capacity of 1½ million barrels per day, as well as ½ million barrels per day of crude production, will exist at the outbreak of war.

In view of the foregoing, the National Security Council requests that for its approval, you propose the necessary action to develop a program leading to the complete supply of Allied petroleum requirements. Such a program should be developed following the general procedures you discussed with the Under Secretary of Defense, Under Secretary of State, Assistant Secretary of Commerce, and others on 28 December 1949.

Sincerely yours,

James Lay
  1. Documentation on U.S. policy with respect to the development of the petroleum resources of the Near East is scheduled for publication in volume v.