S/SNSC Files, Lot 63 D 351, NSC 97 Series

Report to the President by the National Security Council

top secret

NSC 97/2

A National Petroleum Program

Note by the Executive Secretary

References: A. NSC Action No. 5921
B. NSC 97/12
C. Memos for NSC from Executive Secretary, same subject, dated December 11 and 12, 19513
D. Memo for NSC from Executive Secretary, subject, “Security of Certain Middle East Areas”, dated December 11, 19514

At the 109th meeting,5 with the President presiding, the National Security Council, the Acting Secretary of the Treasury,6 Mr. Morison for the Attorney General, the Acting Secretary of the Interior,7 Mr. Fleischmann8 for the Secretary of Commerce9 and the Director of Defense Mobilization adopted NSC 97/1, subject to the changes in paragraphs 3, 7b, 8a, 24 and 34 proposed by the Senior NSC Staff in the enclosure to the reference memorandum of December 11 on the subject.10 The report as amended is enclosed.

In connection with its action on this report the Council noted the statement by the Deputy Secretary of Defense that he did not wish his approval of NSC 97/1 to mean the establishment of a specific priority for the petroleum program in relation to all other defense programs, pending more detailed examination of the program.

[Page 979]

The report as amended was subsequently submitted to the President for consideration. The President has this date approved the Interim Recommendations contained herein and directs their implementation by all appropriate executive departments and agencies of the U.S. Government under the coordination of the Director of Defense Mobilization.

James S. Lay, Jr.
[Enclosure]

Interim Report by the National Security Council on a National Petroleum Program

the problem

1. To indicate the current status of the project for development of a national petroleum program and to recommend interim policies for early implementation pending further study.

analysis

Section 1: Background

2. At the direction of the President, the proposal by the Acting Secretary of Defense on December 27, 1950, relating to a national petroleum program was referred to the Director of Defense Mobilization for the development of a program which would lead to the complete supply of allied requirements (NSC 97).11 At the request of the Director of Defense Mobilization a report on “World-Wide Demand and Supply of Petroleum in Event of a Major War,” dated July 20, 1951, together with a “Tanker Transportation Supplement” dated September 25, 1951,12 was prepared by the Petroleum Administrator for Defense (PAD) for use in the development of a national petroleum program under NSC 97.

3. The general conclusions reached in the PAD Report as to the petroleum situation in a major war commencing in mid–1952 (based on the assumptions set forth in the PAD Report and described in paragraph 5 below) may be summarized as follows:13 [Page 980]

a.
Substantial shortages of crude oil or refining capacity or both, and of transportation, will occur in all of the three war cases studied,* during the first six months of a war as the result of:14
(1)
Loss of areas whose crude oil and refineries are now available to the United States and its Allies.
(2)
Severe losses of producing, refining and distribution facilities as a result of sabotage and enemy action in the areas retained.
(3)
Large increases in military requirements.
(4)
The time required to establish and make effective a drastic civilian rationing and conversion program.
(5)
Loss of tankers and tanker efficiency.
b.
It will be impossible for the petroleum industry to fuel an all out war during the first six months unless these shortages can be substantially reduced by drastic rationing at the outset of a war, stockpiling, producing crude above maximum efficient rate of production and by reducing losses from sabotage and enemy action. In addition to these steps a substantial refinery construction program will have to be initiated immediately.15
c.
If petroleum supply and demand can be brought into reasonable balance during the first six months of a war, which is the period of greatest shortages, the problems thereafter can be solved.

4. Some further observations based on a study of the PAD Report by the Office of Defense Mobilization are pertinent in this connection. Petroleum supply and requirements for an all-out war vary by time factors: i.e., until hostilities commence civilian demand is estimated to increase at around its normal rate of five per cent per year. (After [Page 981] hostilities commence, civilian demand is estimated to be held down to rationed amounts.) Therefore, until hostilities begin, production, refining capacity and so forth, must expand five per cent each year merely to keep even with ordinary requirements. To achieve some excess capacity as a cushion for meeting military demands on a full mobilization basis, expansion must outrun the increase in civilian demand. Industry obviously cannot afford to build very much capacity that will be surplus for long. Neither can Government on a limited mobilization basis afford to build and “mothball” extensive refining capacity and its attendant facilities. Even if it could, there would be a time lag of weeks or months to cover assembling a crew, putting equipment into operating condition and so on, before production would be available. Storage of petroleum products in advance of sudden need is feasible only to a limited extent. Most products deteriorate, and the cost of building storage facilities and carrying large inventories is high. Of necessity, then, petroleum products for war use must largely come from civilian rationing.

5. The PAD Report had to be based on certain assumptions. The Department of Defense supplied a list of its requirements for various petroleum products as of different dates, assuming hostilities would begin July 1, 1952. The Department of Defense also supplied factors for loss of facilities through sabotage, enemy action, tanker sinkings, etc., which varied with the progress of the war. PAD made a series of estimates of what would have to be done in production, refining and transportation to attempt to meet the requirements as set by the military services and essential civilian needs. The PAD Report assumed that adequate steel and manpower would be available and highest priorities would be given. It is apparent from a study of this report that even if unlimited steel were available now and the PAD program initiated immediately, the rate of production called for after the first six months period under the military assumptions could not possibly be met by January 1, 1953, or for a year or more thereafter, as there are limiting factors of feasibilities in the making of equipment, engineering, construction crews, possible component shortages, etc. The severest draft on Supplies is made in the first six months after July 1, 1952 and could not be met by a far wider margin (the figures would run as high as 1,300,000 barrels of crude a day short and a deficiency of 1,750,000 barrels of refining capacity, assuming the loss of the Middle East and the Far East—the worst assumptions of the PAD Report). It is the magnitude of this sudden first six month’s hump in requirements that it would be almost impossible to meet in full. The hump is caused by very heavy loss assumptions by the military services to cover sabotage enemy action, tanker sinkings, etc. In addition to this, military estimates call for enough material to fill the supply lines as well as for current consumption. Even granted that [Page 982] the material could be supplied in the quantities requested, there is grave doubt that it could be transported and landed in storage facilities near the scene of action as promptly and at the rate the first six months’ figures indicate. However, a number of steps can be taken to reduce this first six month’s deficit.

6. The Senior NSC Staff and the departments and agencies concerned have considered the steps recommended in the PAD Report to improve the petroleum situation. As a result:

a.
Action has already been taken or is under way by the responsible departments or agencies on a number of problems.
b.
Other problems are being subjected to further study before additional action is taken or recommended.
c.
With respect to still other problems, it appears desirable at this time to recommend certain interim measures for early implementation pending further study from which more definitive recommendations could be expected to develop.

Section 2: Action Under Way or Under Study

7. Actions already taken or under way include the following:

a.
The Office of Defense Mobilization has prepared a civilian oil rationing program and has initiated some of the preparatory steps that would enable the program to be placed in effect at the earliest practicable moment in the event of an emergency.
b.
The Department of State is taking steps to establish an oil planning group in NATO which will study the essential civilian requirements of NATO countries as a basis for allocations and Rationing in case the need arises. The Department of State is also planning on a selective basis, direct approaches to certain Latin American countries for the same purpose.16
c.
In the design of military equipment and in military plans for expanding petroleum-consuming equipment, the Department of Defense on a continuing basis is giving consideration to the availability of specific petroleum products.
d.
In order to meet wartime requirements, changes in the proportions of products refined from a barrel of crude oil would have to be made promptly. The yield of residual fuel (the lowest-priced major product) would increase substantially at the expense of gasoline (the highest-priced major product) and middle distillates. Unless the prices of petroleum products are promptly adjusted to reflect this change in yields the refiners would not be able without financial loss to alter their yields to produce the desired wartime requirements. To assure that petroleum products are available in the quantities desired the Office of Price Stabilization will make a preliminary study covering price adjustments that might have to be made for petroleum products. The Petroleum Administration for Defense will supply the Office of [Page 983] Price Stabilization with basic data now being prepared on the probable changes in refinery yields during wartime.

8. Problems being subjected to further study before additional action is taken or recommended include:

a.
The Senior NSC Staff is preparing a report on the Eastern Mediterranean and Middle East in connection with which it is weighing the possibilities of holding the Middle East area in the light of all relevant factors, including the importance of Middle East oil.17 The PAD report indicates that a major factor in determining the allied petroleum position in the event of war is whether it is feasible to assure the continued availability of oil from Saudi Arabia, Bahrein, Qatar, and Indonesia.18 In this connection, the Department of Defense is studying the cost of the military effort in terms of feasibility, time and material, and the forces required, to ensure the continued availability of oil from the Saudi Arabia–Bahrein–Qatar area, and the Office of Defense Mobilization is studying the economic cost in terms of feasibility, time and material required to offset the loss of oil from that area.
b.
The Department of State and the Central Intelligence Agency are studying measures that could be taken to counter and reduce the sabotage of oil installations abroad. As part of a wider study concerned with the establishment of effective security programs in critical U.S. industries, the Industry Evaluation Board and the Facilities Protection Board are studying measures that could be taken to counter and reduce sabotage in the petroleum industry in the United States.
c.
The Department of the Army has been charged with preparing plans for the rehabilitation and operation of certain Middle East petroleum facilities during military occupation. These plans are being worked out in close cooperation with interested U.S. oil companies and provide for Army logistical support for teams of oil company technicians engaged in such projects. Such plans do not apply to Iran and Iraq where the UK has primary interest. The Department of State is studying the possibilities of organizing and placing in a state of readiness in other important refining and producing centers abroad reconstruction teams designed to place oil facilities abroad which may sustain damage back in operation in the shortest possible time.
d.
The Office of Defense Mobilization is studying the possibilities of diverting new refining construction from unsafe to safer areas. A preliminary report made to the Senior NSC Staff on this subject as it relates to Western Europe emphasizes the difficulties involved in such diversion. In the light of this preliminary report, further study of this problem appears desirable, including an analysis by the Department of State of the foreign political implications involved.

[Page 984]

Section 3: Possible Additional Interim Measures

9. Problems on which interim recommendations may be made now for early implementation pending further study include:

a.
The possibilities of reducing initial wartime lifting of oil and stockpiling oil (studied by the Department of Defense and the Office of Defense Mobilization).
b.
Further expansion of crude oil production, refining capacity, storage space, oil transportation facilities, etc., including material and other assistance, especially an increase in the availability of steel and other critical materials for such expansion (studied by the Office of Defense Mobilization).
c.
Placing the Elk Hills Naval Reserve in a state of readiness (studied by the Department of Defense).
d.
Arranging for resumption of full-scale production and development in the tidelands oil fields.

Possible interim actions with respect to these matters are discussed in the following paragraphs.

10. It should first be noted, however, that the construction and drilling program that would be required to meet or come fairly close to satisfying the given military and essential civilian requirements would have to be a full mobilization program, and even with pressure and with all priority assistance possible, it could not meet the requirements on the dates used in the PAD Report. At present, governmental policy is one of limited mobilization. However, as petroleum is such an important item, both to military operations and to sustaining the civilian economy and productive ability during a war, there is justification for pushing the petroleum program further and faster than the partial mobilization basis on which it has been functioning. (This has been done in the case of aluminum, for instance.) The ODM, therefore, is working on a program that would not unduly upset the balance of the rest of the mobilization effort now underway, both civilian and military, and which would be based on the principle of as large a program as is compatible with the materials which could be allocated to it for a period of one and a half to two years, beginning July 1, 1952, and the principle that the petroleum industry would be willing to finance itself (except for a tanker problem to be mentioned later) with no aid from the Government except some accelerated tax amortization. All these actions would be steps toward what would have to be done in the event of full mobilization, and once the question of steel and material have been settled, could be put into operation as regards the earlier phases of financing, engineering, construction work, etc., between now and the time when the material would become available during the second half of 1952.

Stockpiling and Storage

11. Previously established military policy on Mobilization Reserve Stocks of petroleum products, requires that the three services establish [Page 985] and maintain on hand quantities of reserve stocks of petroleum products located in accordance with emergency war plans and adequate for 75 days consumption at wartime rates. These are in addition to peacetime operating and safety level stocks. The establishment of 75 days requirements as the quantity of petroleum stocks to be stored was the result of evaluation by the Munitions Board Joint Petroleum Committee, assisted by industry, of the degree of industry’s inability to deliver greatly increased quantities of military specification products during the early period of an emergency.

12. Mobilization Reserve Stocks are not considered adequate for the support of all active forces, however, until they are actually at such locations that their timely delivery to the military forces is within delivery capabilities. While emergency war plans permit a certain amount of overseas storage, it is a practical impossibility to establish stocks adequate to match all of the probable intentions of a probable enemy. This introduces the factor of delivery capability considered in the light of probable enemy action. The Munitions Board Joint Petroleum Committee and the Petroleum Administration for Defense have the joint responsibility for the development of the probable phased production and deliveries of petroleum products during the early days of a war emergency. Up to the present time adequate intelligence on which to base assessments of probable enemy damage to our industrial plants and to our transportation system has not been available, and delivery schedules based on realistic war conditions have not been developed.

13. Current military policy with respect to Mobilization Reserve Stock and the steps being taken to implement it, despite some deficits, are considered to be realistic and practical. However, in connection with this problem it has been proposed that additional storage capacity be constructed beyond presently available and programmed tankage requirements, as one means of attempting to mitigate the difficulty of meeting the extremely high first six months requirements of total mobilization. The PAD Report suggested 25 million barrels additional storage for industry and 20 million barrels for the military.

14. Two problems are involved: getting the storage built and getting it filled under the present rather tight balance between supply and demand. As regards the oil industry, part of the storage should not be filled. When D-Day comes, and early civilian rationing starts, it should take effect first along the Atlantic Coast on the assumption that the military requirements would be shipped from Atlantic or Gulf ports. Nothing would be gained by starting rationing in District 2 (Middle West) on the same date unless the products saved by the rationing could be immediately moved to the East Coast to fill in the gap left by military liftings. This shift cannot be made overnight. It involves trading changes in imports going into District 2 from other [Page 986] Districts, converting crude lines or gas lines to product lines, changing barge movements, changing refinery runs, etc. To do this, without having to cut back refinery production requires tankage. The oil industry, if steel were available, might with some tax amortization assistance, build 80,000,000 barrels of tankage, to take care of new refinery construction and ordinary run of business. The present rate of tank building is about half of this. This need should be filled before building the additional 45,000,000 barrels recommended for cushioning the first six months’ needs.

15. The military services have never had sufficient storage of their own to meet their requirements, and have therefore leased tank space in oil company terminals. If it were necessary in the future for the military services to lease additional tankage, a serious situation would be created, since available industry tankage has been insufficient to meet industry requirements recently. Not all products could be stored successfully for a long time because of deterioration. Navy Special Fuel and Avgas (Avgas may be stored with reasonable safety for up to two years) however, could be stored with very little deterioration, and are the two products for which the demand immediately increases on D-Day. The transportation problem would be simpler if the refineries along the Coast could supply all the Navy Special and Avgas requirements. They have not the capacity, however, and inland and Caribbean refineries will have to make up the deficit. This poses a difficult transportation problem. In World War II, Navy Special and Avgas were moved from the interior in tank cars, an expensive method, requiring time to organize and bringing up questions as to how the supply of tank cars should be proportioned between Navy Special, aviation gas and other urgent requirements. The Congress has just authorized another $750 million for stockpile purposes.19 Whether building tankage and stocking Navy Special and Avgas could be considered a stockpile item over and beyond present approved military stock levels should be investigated. In any event, it would seem that building additional tankage and stocking it with Navy Special and Avgas would be a proper expenditure to be made by the Defense Department or the stockpile, when steel for this could be made available without holding back more important phases of the petroleum program.

Production

16. As the crude availability figures forecast by PAD are based on historical experience of drilling results over reasonably long periods, if the earlier years of the drilling program were below average, then the shortage of crude might be quite serious. Refineries, pipelines and tankers can be built within fairly definite time limits. This is not the case in expanding crude production where it may take from 3 to 5 [Page 987] years to drill up a new field. Enough steel, therefore, should be allowed for an expanded drilling program to be prosecuted now, so as to provide for lead time of production and possible variations from the averages as forecast. This would mean that eventually a reasonable amount of “shut in” potential production would be accumulated as a cushion.

Refining

17. The present approved refinery construction program calls for building domestic refineries at the rate of one million barrels in three years. This amount of construction would barely keep up with the increase expected in civilian requirements, let alone providing some extra capacity for expansion to meet full mobilization requirements. To the extent steel can be made available without seriously dislocating more essential defense and approved civilian programs, a schedule of refinery construction, up to the capacity which the industry is willing to build of its own accord, should be approved, to be phased in as the construction now under way in the present program nears completion. It is hoped that reasonable amounts of steel could be made available for such a program beginning early in the third quarter of next year. The time between the certification of such a program and the time when steel in quantities could be obtained would be required for financing, engineering, placing of orders, foundation work, etc. The refineries built by the industry under this program would undoubtedly be regular, all-purpose refining units, capable of producing the usual peacetime line of products but not especially designed for turning out increased quantities of Navy Special Fuel and Avgas, for instance, as contemplated in part of the refinery construction program envisaged in the PAD Report. To this extent, they might not all be ideally suited to meeting military full-mobilization requirements. However, they would be able to fill a great many of them and contribute likewise to keeping the civilian economy on wheels. The industry would build the refineries with its own funds, with nothing more than some tax amortization assistance and the assurance of the necessary steel, etc. The capacity so built would probably be somewhat in excess of the actual capacity needed to meet the foreseen increase in peacetime requirements. Apparently, the industry is willing to build ahead somewhat on their own financing. Over a period of a few years, the refineries so built would almost certainly find a place in the economy, even if all threat of war were removed, for the civilian demand in the U.S. alone has been increasing at over 5 per cent per annum. It, therefore, requires increasing the industry’s capacity in production, refining transportation and marketing by 10 per cent or more every two years just to stay even with civilian demand. Any other program providing more than a reasonable cushion above rising demands would probably require [Page 988] Government financial aid, particularly for special refining units adapted principally to making Navy Special Fuel and Avgas.

Transportation

18. The Petroleum Administration for Defense has also studied the petroleum transportation situation. Under the assumptions given for sinkings, convoy delays, etc., it appears that the world tanker fleet would have to be increased 50 per cent in carrying capacity to meet the requirements set forth. It is true that not all of this would have to be in tankers, because some vessels in the coastal trade could be replaced by product pipelines. Further study of this problem is under way by PAD transportation experts. However, it is certain that a large number of tankers would be required even if the number was diminished in part by the building of pipelines, in part by changes in convoy practices, and in part by changed estimates of sinkings. It is understood that the tanker type best suited to meet war conditions would be a 20,000 ton vessel capable of 20 knots and carrying in the neighborhood of 170,000 barrels (cubic measure) of products. Such a ship could run with little or no convoy assistance. While industry might be encouraged to build a few of these fast ships, if a portion of the cost was borne in some way by the Government, the type of tanker industry apparently favor for long hauls now is 30,000 ton vessel cruising at 16½ to I7½ knots. If enough of these were built, they could perhaps be handled in a fast convoy group of their own. A study of the tanker situation including convoy routes and practices should be undertaken by the Maritime Administration, with the assistance of PAD, the Navy, and the oil industry. This study should include an investigation of large ship construction facilities in the U.S. and abroad.

19. In the oil industry today the tanker is in port either for loading or discharging considerably less than 24 hours. The figures for port time under convoy conditions assumed in the PAD Report run from a week to 9 days for port time loading and discharging. Presumably, this delay occurs because of vessels arriving in convoy having to take their turns at loading or discharging, waiting for the convoy to assemble and so forth. However, some time could be saved if all loading and receiving terminals, both here and abroad, were equipped with large enough dock lines, manifolds and tank vents to permit loading or unloading tankers at modern industrial rates. The military services should see that this is done, insofar as possible, at all their installations and those which they may have under their jurisdiction here and abroad. PAD could use its best offices to see that industry is urged to do the same.

20. From the above, it is quite evident that the transportation division of a balanced petroleum plan has many complications. In fact, it probably cannot and should not be kept in balance with production and refining. To do this might call for the building of some [Page 989] very costly pipelines in such locations that they would have little economic value in peace time, and building a fleet of several hundred tankers which again would not be needed under conditions of peace. The demand for petroleum, on the other hand, would catch up with any reasonable amount of increase in production and refinery capacity presently under consideration.

Elk Hills

21. Present plans for putting the Elk Hills Naval Reserve into full production are predicated on having at least six months in which to make necessary preparations, including obtaining personnel and facilities. In order to place Elk Hills in a state of instant readiness so that it can be producing at capacity at the start of a war, it will be necessary to take the following steps:

a.
Double the rate of drilling new wells.
b.
Expand pipeline, storage and other commercial facilities in the area.
c.
Construct housing facilities for the naval personnel required.
d.
Maintain identification of qualified personnel who are subject to military orders on D-day for assignment to Elk Hills.
e.
Effect legislation modifying present law (1) to allow production from the Elk Hills field by immediate administrative action without a joint resolution of Congress and (2) allow disposal of the products of the field by allocation and negotiation upon the start of a war in lieu of the complex process now required.

22. Doubling the present drilling rate will require earlier availability of, but no additional steel. However, to continue the drilling program toward the maximum requires consideration of the impact in dollar and steel cost. In considering the construction of housing and messing facilities, and changing present mobilization plans regarding personnel for Elk Hills, it would be pointless to add to an already complex over-all mobilization plan without carrying out the construction to justify it. While present plans are based on a six month period of preparation for production, it is believed that a lesser time in the order of four months can be realized in the face of an urgent situation, by present mobilization plans and the provision of temporary housing or shelter, and the elimination of delaying legal processes. Hence the most practicable course at the present time appears to be to double the drilling rate, expand oil facilities in the area and modify existing law.

The Tidelands Oil Fields

23. A program of full-scale production and development in the tide-lands oil fields of California, Louisiana and Texas would make a substantial contribution toward relieving the petroleum shortage. At present, however, full-scale operations are prevented by the uncertainties stemming from the legal position of the tidelands areas. As a result of Supreme Court decisions in 1947 (California) and 1950, [Page 990] (Louisiana and Texas) action by the Congress is required for definitive settlement of the question of ownership of the oil resources in the tide-lands fields.20 Pending such settlement, the drilling operations under way at the time of the Court decisions are being continued on a temporary basis, a situation which does not encourage full production from existing wells and which effectively prevents exploration, development or new operations. In the light of the over-all petroleum situation it is in the interests of national security to establish some type of arrangement which would permit the resumption of full-scale production and development in the tidelands oil areas pending final disposition of the tidelands problem by the Congress.

Other Preparatory Steps

24. The effectiveness of the Petroleum Administration for Defense as now set up should be augmented by more aid and advice from the grass roots of the industry through organizations needed by PAD to solve problems arising currently in local areas. It is urged that a workable agreement between the Justice and Interior Departments be reached in the near future in order to accomplish this objective. While additional assistance of this character would be helpful to the Petroleum Administration for Defense under limited mobilization, under full mobilization it would be absolutely essential.21

25. The above highlights the steps which could be taken in the immediate future. The full extent of the program will not be known until there has been time to review steel requirements and balance the need of petroleum expansion against other present needs, both military and civilian and to ascertain how far industry will go unaided by Government. After this has been done, PAD should be in a position to make a revised estimate for the military of the petroleum products which would be available at given dates in the next two and one-half years on the basis of this program being followed. A continuing study [Page 991] of the petroleum situation should be made by PAD in conjunction with the military, and changes made as and when conditions warrant.

26. In summary, the petroleum program as now established barely meets expected increases in peacetime demand and cannot support the war demands contemplated in the PAD report. Certain recommendations and proposed actions noted above will alleviate the situation to some extent. However, if conditions alter to the extent of changing from a policy of limited mobilization to a more advanced state, by disregarding the disruptive effect upon the civilian economy, further measures could be taken to increase the petroleum supply.

interim recommendations

27. In view of the importance of petroleum to national security the current petroleum program should be expanded and accelerated beyond the limits presently imposed on the mobilization program as a whole by the principle of partial mobilization. The program should not unduly upset the balance of the rest of the current mobilization effort, but should be as large as is compatible with the materials that could be allocated to it for a two-year period beginning in mid-1952. Preparatory action should begin immediately.

28. The national security interest requires the resumption of full-scale production and development in the tidelands oil fields, if necessary under temporary arrangements pending final action by the Congress.

29. Sufficient steel should be allocated for an expanded program of petroleum drilling to be prosecuted as rapidly as availabilities permit.

30. To the extent steel can be made available without seriously dislocating more essential defense and civilian programs, a schedule of refinery construction, up to the capacity which the industry is willing to build of its own accord, should be approved, to be phased in as the construction now under way in the present program nears completion.

31. When steel can be made available, the oil industry should be encouraged to double the present rate of construction of industrial tank storage capacity. When steel can be available without retarding more important phases of the petroleum program, additional military tank storage capacity should be constructed and stocked by the use of stockpile or military funds.

32. Petroleum port facilities under military control here and abroad should in so far as possible be provided with equipment which would permit loading and unloading of tankers at modern industrial rates. Industry should be encouraged to provide similar equipment for industrial port facilities. Immediate consideration should be given to providing government assistance to industry in the construction of a limited number of fast tankers and to encouraging industry to build a larger number of intermediate-speed tankers.

[Page 992]

33. In order to increase the readiness of the Elk Hills Naval Reserve:

a.
The presently planned drilling program should be continued at double rate.
b.
Gathering lines and tanks for the new wells should be provided.
c.
The development of commercial facilities in the area to assure use of the products of the field should be encouraged and supported.
d.
Recommendations to Congress should be initiated to simplify the legal action required for putting the field into production.

34. In order to receive assistance and advice from the industry, a workable agreement between the Departments of Justice and Interior should be attained in the near future concerning any problems which are involved.22

  1. Not printed. The purport of NSC Action No. 592 is presented in this Note by the Executive Secretary to the National Security Council.
  2. Draft report NSC 97/1, “A National Petroleum Program,” November 27, 1951, became, in slightly revised form, NSC 97/2.
  3. Neither memorandum is printed. The memorandum of December 11 circulated revisions to NSC 97/1 proposed by the NSC Senior Staff. The memorandum of December 12 circulated, at the request of the Secretary of Defense, a memorandum by the Joint Chiefs of Staff dated December 11 in which they recommended changes to paragraph 3 of NSC 97/1 and, subject to the changes, expressed general concurrence from the military point of view with the interim recommendations and analysis contained in NSC 97/1.
  4. Ante, p. 974.
  5. December 12.
  6. Edward H. Foley.
  7. Richard D. Searles.
  8. Manly Fleischmann, Administrator, National Production Authority.
  9. Charles Sawyer.
  10. Not printed. The Department of State recommended the changes which were adopted in paragraph 7b. For information regarding this textual change, see footnote 5, p. 974.
  11. Foreign Relations, 1950, vol. i, p. 489.
  12. Neither printed.
  13. In NSC 97/1, “A National Petroleum Program,” a report to the National Security Council by Executive Secretary Lay, November 27, 1951, this sentence reads as follows:

    • “3. The general conclusions reached in the PAD Report as to the petroleum situation in a major war commencing in mid-1952 may be summarized as follows:” (S/PNSC Files, Lot 61 D 167)

  14. See page 4 of PAD Report, dated July 20, 1951, on “World-Wide Demand and Supply of Petroleum in Event of a Major War.” [Footnote in the source text. The report is not here printed. The three war cases studied and referred to in the PAD Report are as follows:

    • Case X. The entire Middle East, including Turkey; Denmark, Greece, Sweden and Western Germany in Europe; and Burma, Thailand, Indo-China, Malaya, Hongkong, Korea, Indonesia, and British Borneo in the Far East. All of these countries to be lost early in the war. They will be regained late in the war, and their minimum civilian petroleum requirements will be supplied by the United States and Allies. The amounts so supplied are assumed to be included in the military requirement. Crude oil from the portions of the Middle East regained is considered to be unavailable to the U.S. and Allies, during the war period.
    • Case y. Case Y is the same as Case X, except that Indonesia-British Borneo supplies to be retained by the United States and Allies.
    • Case Z. Case Z is the same as Case Y, except that in the Middle East, the countries of Bahrein, Qatar and Saudi Arabia will not be lost.” (S/PNSC Files, Lot 61 D 167)]

  15. In NSC 97/1, November 27, 1951, this passage reads as follows:

    • a. Substantial shortages of crude oil, refining and transportation capacity will occur during the first six months of a major war primarily as a result of:” (S/PNSC Files, Lot 61 D 167)

  16. In NSC 97/1, November 27, 1951, this paragraph originally stated:

    • b. It will be impossible for the petroleum industry to fuel an all-out war during the first six months unless these shortages can be substantially reduced by holding all or a substantial part of the major foreign oil-producing areas; or by drastic rationing at the outset of the war, by stockpiling, by producing crude oil above MER (maximum efficient rate of production), by reducing losses from sabotage and enemy action, and by immediately initiating a substantial refinery construction program.” (S/PNSC Files, Lot 61 D 167)

  17. In NSC 97/1, November 27, 1951, this paragraph states:

    • b. The Department of State is taking steps to secure standby oil rationing plans in other countries, including the proposed establishment of an oil planning group in NATO, and direct approaches to certain Latin American countries.” (S/PNSC Files, Lot 61 D 167)

  18. In 1952, the project under reference produced reports in the NSC 129 series, “U.S. Objectives and Policies With Respect to the Arab States and Israel.” Documentation regarding that series will be treated in a subsequent volume of Foreign Relations.
  19. According to a memorandum for the National Security Council by Executive Secretary Lay, December 11, 1951, this sentence was added to paragraph 8a in the NSC Senior Staff meeting held that day (S/SNSC Files, Lot 63 D 351, NSC 97 Series).
  20. Public Law 253 enacted November 1, 1951; 65 Stat. 736.
  21. United States v. California, 332 US 19; United, States v. Louisiana, 339 US 699, REH. DEN. 340 US 856: United States v. Texas, 339 US 707, REH. DEN. 340 US 848, and see also 340 US 900.
  22. In NSC 97/1, November 27, 1951, this paragraph reads as follows:

    • “24. The effectiveness of the Petroleum Administration for Defense as now set up should be augmented by more aid and advice from the grass roots of the industry. Such help can come from establishing an organization identical or similar in character to that found very effective in World War II. This would mean providing counterparts to the functional District Committees of the former Petroleum Administration for War to supply the present Petroleum Administration for Defense in Washington information and assistance in solving oil problems arising currently in various geographic areas. It is understood that the Department of the Interior has favored such a move, but that the Anti-Trust Division of the Justice Department—although this same program was successful during World War II—may have some objections. It is urged that a workable agreement between the Justice and Interior Departments be come to in the near future, for while this additional aid to the Petroleum Administration for Defense would be helpful under limited mobilization, under full mobilization it would be absolutely essential.” (S/PNSC Files, Lot 61 D 167)

  23. In NSC 97/1, November 27, 1951, this paragraph reads as follows:

    • “34. With respect to the establishment of industry committees, a workable agreement between the Departments of Justice and Interior should be attained in the near future.” (S/PNSC Files, Lot 61D 167)