CONSERVATION: Oil Contrivance

(See front cover)

It is illegal for two oilmen in one State to agree with two oilmen in another State to limit their joint production of crude petroleum. Their agreement, the U. S. holds, is a conspiracy in restraint of trade.

But it is perfectly legal for the first two men to make an oil-production agreement within their State, and the other two men to make a similar agreement within their State, and then for the two States to join those agreements together into an interstate compact or treaty.

Some such plan for the limitation of oil production in western States was expected to be worked out at the meeting of Governors, U. S. officials and leaders of the oil industry called for June 10 at Colorado Springs by President Hoover. The object is to contrive an agreement which will be in restraint of overproduction but not in restraint of trade.

President Hoover established oil conservation as a major policy of his administration when he ordered an end to permits for drilling on Government land, and to renewals of lapsed oil leases (TIME, March 25). This official step encouraged the oil industry, as represented by the American Petroleum Institute, to believe that it had a friend in the White House who would smile upon its own efforts to hold down production. Confronted with an enormous output and low prices, operators agreed among themselves to plug their production for 1929 at the 1928 level. They asked the Federal Oil Conservation Board to sanction this agreement. Attorney-General Mitchell ruled that such an agreement among the producers of oil would probably violate the anti-trust laws.

Eleven Governors were called by President Hoover. Seven accepted promptly. Though the oil production of Colorado is comparatively trivial (only about 7,500 barrels per day), that State’s Democratic Gov. William H. Adams (centre figure, front cover) was an understanding host to the other executives and oilmen arriving at his State’s famed resort. Gov. Adams, now 67, has grown grey and wrinkled in the service of Colorado. For 38 years he was a State Senator.

Were the Governor-guests ranked around the conference table the way their States ranked in oil-production, the youngest executive would sit at the head. Gov. Dan Moody (lower left on front cover) of Texas is 36. His State recently has been exuding oil at the terrific rate of approximately 780,000 barrels per day.

Next to Gov. Moody, if this order were followed, would sit California’s Gov. Clement Calhoun Young. 60, onetime schoolteacher and realtor (lower right, front cover). While oil gushed from his State’s fields at the rate of about 769,000 barrels per day, Gov. Young was prepared to tell his conferees something of his State’s efforts to limit crude oil and gas production. California has a State Oil Umpire (F. C. Van Diesne) to curtail production. Potential production is estimated by a general engineering committee of the oil operators and from these estimates Umpire Van Diesne prepares his orders for allowable production. His most recent order is calculated to clip some 200,000 barrels per day from California’s oil flow, bring production down to around 600,000 barrels per day or less. The California method of production limitation may well prove a starting point for the discussion at Colorado Springs.

Next to California as an oil State comes Oklahoma (675,000 barrels per day). Oklahoma’s Acting Governor, William J. Hollpway (upper right, front cover) rose to his office by the impeachment and removal of Henry Simpson Johnston ten weeks ago (TIME, April 1).

Fourth in the order of oil precedence is Kansas. Governor Clyde Martin Reed, 57, is a onetime railway mail clerk, judge of the defunct Kansas Court of Industrial Relations, publisher of the Parsons Daily Sun (upper left, front cover). The oil production in his State runs about 115,000 barrels per day.

The two other prompt acceptors of the Hoover invitation were Wyoming’s Gov. Frank Collins Emerson, 47, able engineer, and New Mexico’s Gov. Richard C. Dillon. Harvey Parnell of Arkansas, Gov. Huey P. Long of Louisiana, John E. Erickson of Montana, George Henry Dern of Utah were expected to send representatives if they could not go themselves to Colorado Springs.

At the table with the Governors was set a seat for Secretary of the Interior Ray Lyman Wilbur. As head of the Federal Oil Conservation Board, it was his duty to call the meeting to order, to deliver a message from President Hoover.

The real management of the conference was to fall upon California’s Mark Lawrence Requa, who took an oath of office last week in Washington to qualify him as permanent chairman. Mr. Requa, now 62, is one of President Hoover’s closest personal friends. Like the President, he is a mining engineer, a Californian. Mr. Requa is a good negotiator, an able “contriver” who will pull, if anybody can, the Colorado Springs conference through to success for his great & good friend in the White House.

Edwin Benjamin Reeser, head of Barnsdall Corp., a Tulsa independent oil company, president of the American Petroleum Institute, and a great handshaker, was ready to lead the oil industry into the conference. Once the A. P. I. wanted to fight the U. S. on the legality of its interstate production agreement. Now it is willing to cooperate in developing some sort of State-treaty plan. With President Reeser to Colorado Springs, as a committee from the A. P. I., were to go 21 other potent oilmen, including Ralph Clinton Holmes (Texas Corp.), Kenneth Raleigh Kingsbury (Standard of Calif.), W. S. Fitzpatrick (Prairie), Henry May Dawes (Pure Oil), Walter Clark Teagle (Standard of N. J.), Robert G. Stewart (Pan-American), Charles F. Meyer (Standard of N. Y.), Albert Edward Watts (Sinclair).

While the Governors and delegates were assembling, daily oil production of the U. S. shot up to 2,690,000 barrels, an increase of 46,000 barrels per day over the average for the week before.