The Seven Trillion Dollar Oil Battle
Douglas, Paul H.
The Seven Trillion Dollar Oil Battle by PAUL H. DOUGLAS In the Green River formation in Northwest Colorado, Utah, and Wyoming, lies untold wealth, most of it in land owned by the American...
...A great advantage of the in situ method is that it extracts the oil from the rock beneath the ground without extracting the rock...
...The Government-owned deposits are, as a matter of fact, much the richest and are in the centers of the shale fields where they are of great depth...
...This experience ought to make us aware of two things: First, that a massive, powerful, and well-financed campaign will be launched to secure maximum advantage for private and sectional interests in the development of oil shale...
...Housing and urban redevelopment are other badly-needed and underfinanced social necessities...
...It wants to set favorable rules now on royalties and leasing arrangements, and insists also upon the maximum it can get in terms of tax profits...
...Any leasing arrangement, therefore, should not part title with the oil when it is below the surface, but only involve a transfer of title once the oil has been extracted from the earth...
...Four—The terms of the division of funds between the national Government and the state would have to be radically revised...
...Testimony before the Senate Interior Committee indicates, in my opinion, that the oil industry "wants to have it both ways...
...Consider the intense effort which was made some years ago to gain control of the so-called offshore oil reserves by a few states and special interests...
...Terrific pressures are growing on the responsible Federal officials to make decisions soon about the development of the resource...
...A titanic struggle is already under way as to who will develop this resource and on what terms...
...It is this indifference of the public which gives to the concentrated private interests such a great political advantage over the diffused general interest...
...One can also be helped to realize the extent of this resource by contrast with the fact that the total recoverable conventional oil in the entire United States is now estimated at only 360 billion barrels...
...Even if this were all, the ultimate royalties would amount to from 700 to 850 billion dollars of which four-fifths to five-sixths would be paid on oil deposits in land owned by the Federal Government...
...This is one of the great submerged issues of American government...
...From 2.0 to 2.6 trillion barrels of oil—or 2,000 billion barrels, or two million million barrels...
...Let us act while there is yet time...
...Only ten per cent would go into the Federal treasury...
...There are presently two alternative processes for extracting this oil...
...Two—If it is probable, as Professor Morris Garnsey of the University of Colorado fears, that we cannot get genuinely competitive bidding from so tightly controlled an industry, then, as he suggests, we could have development by a Government corporation modeled on the TVA, or a genuine Comsat type of operation in which the Government and a number of the private companies would be in partnership...
...Three—Conservation practices should be required so that we would not create a huge wasteland from the residue of the shale...
...Six—Finally, we should see to it that these huge sums are used for the benefit of the people of the United States...
...We do not yet know the precise production costs of these methods but preliminary estimates seem to indicate that they are, or shortly will be, commercially feasible...
...Senator from Illinois, is now professor of economics at the New School for Social Research...
...Since the Mexican War was fought by men from the entire country and the territory taken was paid for from the general treasury, it would be only fair that the Federal Government should get the overwhelming share of the royalties and receipts...
...So are elementary, secondary, and higher education...
...For how can the private companies claim damages and depletion on latent oil reserves which they have never owned...
...Thereafter, we should move in the following directions of policy and practice to protect the public equity in oil shale lands: One—If it is possible to secure truly competitive bidding from the oil companies, we could have private extraction by private parties under leases from the Government which should provide Government royalties for at least a one-eighth share and quite probably for higher premium payments for the better locations...
...This is grossly excessive when applied to oil in land owned by private companies or whose oil rights are leased by them...
...At a current price of $2.77 a barrel for crude oil, this would be worth from five and one half to seven trillion dollars...
...If we give away these rights as we did with the airwaves and most of the national domain, we will enrich a few beyond the utmost dreams of avarice while the great common needs of the American people will remain unsatisfied and unfilled...
...If we can get these funds pledged \o specific and much needed lines of development, we would draw to ourselves allies who would otherwise tend to be uninformed and indifferent...
...The other is by the so-called in situ method, the interior application of intense heat, possibly by an underground nuclear explosion, and the subsequent pumping out of the oil which would be thus released...
...We do not want another Teapot Dome to occur as it did in the Harding Administration...
...And second, that the public, if it is sufficiently alerted and has adequate spokesmen, can protect its interest in these resources...
...The Seven Trillion Dollar Oil Battle by PAUL H. DOUGLAS In the Green River formation in Northwest Colorado, Utah, and Wyoming, lies untold wealth, most of it in land owned by the American people...
...So are technical and job training, and adult education as well...
...I have confidence in the Congress, but I also know some of the pressures that members will be subjected to and the effectiveness of the pressures which come particularly from the oil and gas industry...
...He wrote "America in the Market Place" and "Ethics in Government...
...The ordinary oil royalty to the owners of land is 12.5 per cent, or one-eighth of the value per barrel...
...To protect that interest I propose the establishment of a National Citizens Watchdog Committee on oil shale...
...I pray that it may be settled in the public interest...
...The recovery of this oil has been in progress for several years and is returning several hundred million dollars to the Treasury each year...
...We cannot afford another Teapot Dome...
...This summer he made a special trip to oil shale country...
...It is contained in the so-called shale rock which the Geological Survey estimates contains from 2.0 to 2.6 trillion barrels of oil...
...This should be a permanent committee of prominent and genuine experts in conservation, taxation, the technology of oil extraction, and the power needs and resources of the United States...
...Another 37.5 per cent would go into the educational funds of the three states in question...
...One is by mining the rock, then crushing it and extracting the oil, which can then be partially processed...
...That would be too wasteful of money and too destructive of the public faith in government...
...Some of the funds could also be applied to the reduction of the national debt...
...The crushing method would leave three-quarters of the rock in the form of a powder which would disfigure the countryside and pollute the rivers...
...If development were to take place today, it would be under the Mineral Leasing Act...
...Yes, the words two trillion are correct...
...It would be even more ridiculous if the oil companies were able to obtain this depletion allowance on oil not owned by them but rather by the Government...
...All this would swamp the thinly populated Western states with grossly excessive sums for limited purposes...
...This issue is of crucial importance...
...One appropriate use would be to acquire additional and much needed park and recreational areas...
...But it is wholly unjustified to make the tax profits decision if the information is absent which is necessary to make the development rules...
...It is now clear that the fight which was made in the Senate to protect the public interest in the offshore lands and continental shelf was largely successful...
...It is vital, therefore, that the public awaken to the fabulous sums which are at stake...
...PAUL H. DOUGLAS, formerly U.S...
...This would assign 52.5 per cent of the royalties and receipts to the Reclamation Fund, to be used for reclamation purposes in the eighteen reclamation states...
...Five—The oil companies are already making moves to carry over into this field the 27.5 per cent depletion allowance which now exempts 2.5 billion dollars of oil income from taxation...
...These are badly needed, and, with the price of land rising every year, our recreational fund is already grossly inadequate...
...From eighty to eighty-five per cent of this oil is Government-owned, in land which we took over from the Mexican government after the War of 1846 and for which we paid $15 million in conscience money...
...It should be the function of this committee to carry on a constant effort to alert the public to the issues and to bring to bear a concentrated representation of the general interest of the people of the United States to obtain a proper resolution of the oil shale question...
...In other words, the recoverable oil in the oil shale reserves is approximately six times the amount of conventional oil in the United States...
...In addition, I propose, as others have suggested, that the Congress act now to assign irrevocably those royalties and other income from the leasing of the oil shale which may be paid by private developers to investment in human needs and development and that we use the vast income from it to build up other natural and human resources of the nation...
Vol. 31 • October 1967 • No. 10
