257. Memorandum for the Record, by the President’s Deputy Assistant (Persons)1
SUBJECT
- The Effect of a Rapid Rise of Oil Imports upon the Independent Oil Producers and consequently upon the Adequacy of our Oil Reserves to meet Defense Needs
The President’s Appointment with Senators Carlson, Dirksen, and O’Mahoney, at 9:00 a.m. this date.
Senator Carlson referred to the amendment to the Reciprocal Trade Agreements Act which provides for certain action on the part of the President when imports of any commodity rose to the point where it might endanger our reserves for national defense needs. He pointed out the rapid rise of oil imports and the fact that actually the increase is just starting—that new concessions were being given in Venezuela—and indications were that imports would be increased very materially in the comparatively near future. He referred to 16.6 percent of our overall oil consumption as being the figure which the President’s Cabinet Committee on Energy Supplies and Resources Policy mentioned as being a reasonable level for imports. He expressed the hope that something could be done on a voluntary basis—within the anti-trust laws—to restrict imports at approximately this level.
The President referred to the impracticability of working out quotas on the basis of fairness although he stated his willingness to consider every practicable means of arriving at a solution. He advised the group confidentially that very shortly he will appoint a committee outside of Government and outside the oil industry to look into all the facts and make recommendations to him. He referred to previous efforts to handle this matter on a voluntary basis because of the inability of persuading two of the companies, Sun Oil and Tidewater, to participate. He further expressed the thought that in his opinion tariff alone would not do the job.
Senator O’Mahoney emphasized what he considered the serious implications of a continued rise in oil imports on our national defense. He went on to state that more and more independent oil producers were finding it difficult to remain in business. He further stated that this matter had a direct impact on the Federal interest as the Federal Government has some 75 million acres of government [Page 692] lands in oil and gas leases. He brought out the fact that this produced a substantial royalty, which was broken down as follows:
| 52½% | Reclamation |
| 10% | Treasury for expenses |
| 37½% | To the States for schools and roads |
He indicated that Wyoming alone gets $9 million a year in this manner. He emphasized the growing impact on this revenue if steps were not taken to insure the survival of the domestic producer. He mentioned the fact that the legislation under which the President might act was broad and gave the President authority for quotas, tariffs, or import taxes, as means of getting at this problem. He further mentioned that the independent operators are at the mercy of the integrated companies for the sale of their oil as they do no processing on their own.
The President indicated that he was not only interested in the health of the domestic industry but was also concerned with the effect, on national defense and on the states’ income, of depletion of our reserves, and that he wished to encourage exploration without causing the marketing of too much domestic oil and thereby unduly reducing our domestic reserves—in other words, he felt that a nice balance should be obtained. Senator O’Mahoney referred to the Federal and State Conservation laws that could be used in this regard.
The President again discussed a quota system and emphasized the difficulty of keeping it sufficiently flexible to take care of new discoveries, such as in Brazil, for example. He emphasized the necessity for finding a flexible formula.
Senator O’Mahoney felt that the tariff would do this, but the President said that some of his advisers had indicated that the solution was not that simple.
Senator Dirksen indicated that information coming to him was that before too long a time we would be swimming in oil from imports and expressed the hope that the matter could be handled on a voluntary basis. He further felt that if a “base period” could be selected which could be agreed upon by the domestic industry, a voluntary quota system might work. He emphasized that this period should not be rolled back too far, as no agreement could then be reached. He further indicated that provisions for newcomers, such as Yemen, Brazil, Libya, should be taken care of in any solution that might be arrived at.
The President emphasized that he wants ideas and wants to arrive at a solution that would be as fair as possible to all concerned. He told the Senators that he would be delighted to hear from them [Page 693] direct or would make arrangements to have them communicate with the committee which he plans to appoint. The Senators advised that they would be very glad to submit to the President a comprehensive memorandum on the subject which could be made available to the committee.
The President requested the Senators to keep confidential the fact that he is going to appoint this committee until he has had the opportunity to complete the composition and make the announcement of the appointment of the committee.