of cheap foreign oil averaged 373,000 barrels per day and reached a peak of 412,000 barrels per day 10 years later, in April 1932. This oil either went into American storage or forced domestic production into storage by virtue of the fact that it was displaced from the American market and American consumption by these cheap imports.

Soon thereafter great new discoveries of petroleum deposits were made in the United States. Notable among these discoveries are the Seminole areas in Oklahoma, the Kettleman Hills area in California, the Yates, Conro, and east Texas areas in Texas.

The result of new discoveries, new methods of drilling and production, improved methods of refining, has caused practically all the great leaders of the industry to recently advise Congress that there is no imminent danger of exhaustion of the petroleum reserves of this country. As a matter of fact, recent testimony before the socalled "Cole committee " of the United States House of Representatives, which has just completed an exhaustive investigation of the petroleum industry, shows the total petroleum reserves of the country to exceed approximately 700,000,000,000 barrels. The testimony before this committee shows the present and anticipated future demand average approximately 1,000,000,000 barrels annually. This figure becomes very significant when we consider that since the beginning of the industry down to the present time we have used less than 17,000,000,000 barrels.

to

Of the 700,000,000,000 barrels which constitute the estimated total, approximately 39,000,000,000 barrels are available from natural reservoirs, 92,000,000,000 barrels from oil shales, and some 575,000,000,000 barrels from the coal deposits of the country. When we realize that the testimony before this committee shows that even at the present time gasoline can be extracted from coal at a cost of less than 12 cents per gallon, we see that the supply which will be available to consumers for hundreds of years will be at a price which is neither excessive nor prohibitive. The testimony before this committee also shows that there is a possibility, yes, indeed, a probability, of the discovery of substitute and alternative fuels for petroleum and gasoline. The testimony also shows conclusively that the transition period in the derivation of petroleum from one source to the other will be gradual and that it will cause no disruption whatsoever in the economic or industrial structure or development of the Nation. When these facts and figures are considered in connection with the fact that the State of Texas and the other principal oil-producing States have strict conservation laws which absolutely prohibit the physical waste of any of our petroleum resources, then the necessity for drastic revolutionary Federal legislation, such as the Thomas bill, is exploded as a myth.

With reference to the question of present underproduction of crude petroleum, we call your attention to the fact that from data compiled from figures issued by the United States Bureau of Mines, domestic production for the 16-month period beginning September 1933 and ending December 1934, has averaged 2,479,000 barrels per day, whereas total demand over the same period of time has averaged 2,709,000 barrels per day. This shows conclusively an average daily underproduction of 230,000 barrels per day. During the same period of time we imported into this country cheap foreign oils at an average rate of 124,000 barrels per day and we withdrew from storage over the same period of time an average of 106,000 barrels

per day. Thus we see that there was an actual underproduction in the United States of an average of 230,000 barrels per day and this deficiency between American production and total demand was made up by imports of foreign oils and withdrawals from storage of oil which was forced into storage by virtue of past imports. When we add together the average daily imports, 124,000 barrels, and the average withdrawals from storage, 106,000 barrels, we find that it totals the 230,000 barrels underproduction. We will insert at this point a table which will show graphically that an actual underproduction does exist. These figures have been compiled from data of the United States Bureau of Mines:

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TABLE I.-Comparison of consumer demand "1 with total demand 2 and with domestic production, for all oils in the United States, September 1933 to December 1934, inclusive, by months

[Daily average in thousands of barrels of 42 U. S. gallons. All figures exclusive of natural gasoline and

benzol]

1 Estimate by Federal agency and orders of Administrator for “required production of crude oil to balance consumer demand for petroleum products."

2 Total demand for all oils in terms of crude oil.

Source: Compiled from data of the U. S. Bureau of Mines.

It has been the policy of the Federal Oil Administration under the code to restrict American production to less than the consumer demand. By consumer demand is meant that amount of oil which is consumed in the United States. It does not take into consideration demand for export. The colunmn in the table above under "Total demand" represents the consumer demand plus exports.

In spite of the fact that in years gone by there was built up in this country a tremendous amount of storage, reaching some 600,000,000 barrels, there is today in storage approximately 320,000,000 barrels. This represents less than 4 months' supply.

Therefore, the statement made in this proposition that there is no overproduction of oil in the United States, has been conclusively proven; that the industry is in excellent statistical position from the standpoint of price is absolutely beyond dispute.

Oil produced in excess of that amount permitted to be produced by State regulations (our so-called "hot oil ") is being assiduously reduced to a minimum. The Federal Government in administering the Connally law, which prohibits the shipment of oil or its products across State lines which is produced in excess of that amount permitted to be produced by State laws and State orders, is functioning efficiently and well. The State and Federal officers are working in close harmony and cooperation in the administration of present laws and orders. There is no avoidable waste taking place in the production of oil.

It can, therefore, be safely stated without fear of successful contradiction, that since there is no waste, no danger of the exhaustion of our petroleum supplies, no overproduction, and since the statistical position of the industry is excellent from the standpoint of price, that no emergency exists, and no necessity exists for the passage of this legislation.

CONCLUSION

In the original memorandum which was filed it was sought to show that the proposed legislation was unconstitutional. Many authorities were cited in support of the fact that production is not commerce and in support of the fact that Congress has no constitutional authority to regulate production, either under the guise of regulating interstate commerce or in preparation for the national defense or in the interest of the general welfare. Authorities were also cited to show that Congress could not in a declaration of policy to a bill, make an erroneous finding of fact which would be binding upon the courts, but that the court would look behind the finding of fact and ascertain the real truth.

In this memorandum it has been the purpose to show that Texas as a sovereign State occupies an unique position with reference to the question under consideration; that Texas was not carved out of the public domain but came into the Union by articles of annexation which have the force and effect of a treaty; that certain rights which pertain particularly to the question under discussion were specifically reserved by Texas and that those rights were guaranteed to Texas by the United States.

We have also attempted to show that Texas in her sovereign capacity, is the owner of petroleum deposits, leases, and royalties from which she derives vast revenue in addition to the revenue which comes to her through taxes on the petroleum industry.

It has also been the purpose to show that in view of the fact that the various oil-producing States have comprehensive conservation measures in force, and in view of the further fact that there is no overproduction, but that the industry is in excellent statistical position and is enjoying prosperity, that no necessity exists for the passage of this legislation.

Respectfully submitted, at the request of and on behalf of Hon. James V. Allred, Governor of Texas, the railroad commission of Texas and Hon. William McCraw, attorney general of Texas.

BLALOCK, BLALOCK & BLALOCK, By JACK BLALOCK.

EXHIBIT A

A TREATY OF ANNEXATION, CONCLUDED BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF TEXAS

The people of Texas having, at the time of adopting their constitution, expressed by an almost unanimous vote, their desire to be incorporated into the Union of the United States, and being still desirous of the same with equal unanimity, in order to provide more effectually for their security and prosperity; and the United States, actuated solely by the desire to add to their own security and prosperity, and to meet the wishes of the Government and people of Texas, have determined to accomplish, by treaty, objects so important to their mutual and permanent welfare:

For that purpose, the President of the United States has given full powers to John C. Calhoun, Secretary of State of the said United States, and the President of the Republic of Texas has appointed, with like powers, Isaac Van Zandt and J. Pinckney Henderson, citizens of the said Republic: and the said plenipotentiaries, after exchanging their full powers, have agreed on and concluded the following articles:

ARTICLE I

The Republic of Texas, acting in conformity with the wishes of the people and every department of its government, cedes to the United States all its territories, to be held by them in full property and sovereignty, and to be annexed to the said United States as one of their Territories, subject to the same constitutional provisions with their other Territories. This cession includes all public lots and squares, vacant lands, mines, minerals, salt lakes and springs, public edifices, fortifications, barracks, ports and harbors, navy and navyyards, docks, magazines, arms, armaments and accutrements, archives and public documents, public funds, debts, taxes and dues unpaid at the time of the exchange of the ratification of this treaty.

ARTICLE II

The citizens of Texas shall be incorporated into the Union of the United States, maintained and protected in the free enjoyment of their liberty and property, and admitted, as soon as may be consistent with the principles of the Federal Constitution, to the enjoyment of all the rights, privileges, and immunities of citizens of the United States.

ARTICLE III

All titles and claims to real estate, which are valid under the laws of Texas, shall be held to be so by the United States; and measures shall be adopted for the speedy adjudication of all unsettled claims to land, and patents shall be granted to those found to be valid.

ARTICLE IV

The public lands hereby ceded shall be subject to the laws regulating the public lands in the other territories of the United States,

as far as they may be applicable; subject, however, to such alterations and changes as Congress may from time to time think proper to make. It is understood between the parties that if, in consequence of the mode in which lands have been surveyed in Texas, or from previous grants or locations, the sixteenth section cannot be applied to the purpose of education, Congress shall make equal provision by grant of land elsewhere. And it is also further understood that hereafter the books, papers, and documents of the General Land Office of Texas shall be deposited and kept at such place in Texas as the Congress of the United States shall direct.

ARTICLE V

The United States assume and agree to pay the public debts and liabilities of Texas, however created, for which the faith or credit of her Government may be bound at the time of the exchange of the ratifications of this treaty; which debts and liabilities are estimated not to exceed, in the whole, ten millions of dollars, to be ascertained and paid in the manner hereinafter stated.

The payment of the sum of $350,000 shall be made at the Treasury of the United States within 90 days after the exchange of the ratification of this treaty, as follows: $250,000 to Frederick Dawson, of Baltimore, or his executors, on the delivery of that amount of 10 percent bonds of Texas -; $100,000, if so much be required, in the redemption of the exchequer bills which may be in circulation at the time of the exchange of the ratifications of this treaty. For the payment of the remainder of the debt and liabilities of Texas, which, together with the amount already specified, shall not exceed ten millions of dollars, the public lands herein ceded and the net revenue from the same are hereby pledged.

ARTICLE VI

In order to ascertain the full amount of the debts and liabilities herein assumed, and the legality and validity thereof, four commissioners shall be appointed by the President of the United States, by and with the advice and consent of the Senate, who shall meet at Washington, Tex., within the period of 6 months after the exchange of the ratifications of this treaty, and may continue in session not exceeding 12 months, unless the Congress of the United States should prolong the time. They shall take an oath for the faithful discharge of their duties, and that they are not directly or indirectly interested in said claims at the time, and will not be during their continuance in office; and the said oath shall be recorded with their proceedings. In case of the death, sickness, or resignation of any of the commissioners, his or their place or places may be supplied by the appointment as aforesaid or by the President of the United States during the recess of the Senate. They, or a majority of them, shall be authorized, under such regulations as the Congress of the United States may prescribe, to hear, examine, and decide on all questions touching the legality and validity of said claims, and shall, when a claim is allowed, issue a certificate to the claimant, stating the amount, distinguishing principal from interest. The certificates so issued shall be numbered, and entry made of the number, the name