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1976/10/14 SJR126 Extension of the Interstate Compact to Conserve Oil and Gas
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The original documents are located in Box 63, folder "10/14/76 SJR126 Extension of the
Interstate Compact to Conserve Oil and Gas" of the White House Records Office:
Legislation Case Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Exact duplicates within this folder were not digitized.
APPROVED OCT 14
&10/14/76
THE WHITE HOUSE
ACTION
WASHINGTON
Last Day: October 15
October 12, 1976
To
MEMORANDUM FOR
THE PRESIDENT
FROM:
JIM CANNON
SUBJECT:
S.J. Res. 126 - Extension of the
Interstate Compact to Conserve Oil
and Gas
Attached for your consideration is S.J. Res. 126, sponsored
by Senators Jackson and Johnston.
The enrolled resolution grants congressional consent,
as required by the Constitution, to extend the Interstate
Compact to Conserve Oil and Gas between 29 oil and
gas producing States and six associate member States.
Congress has consented to extensions of the Compact at
2-year intervals from 1935 to 1972. The most recent
consent expired on September 1, 1974. Thus, the Compact
has been without the congressional consent required by
the Constitution for over 25 months.
Additional information is provided in OMB's enrolled bill
report at Tab A.
OMB, Max Friedersdorf, Counsel's Office (Kilberg) and I
recommend approval of the enrolled resolution.
RECOMMENDATION
That you sign S.J. Res. 126 at Tab B.
Digitized from Box 63 of the White House Records Office Legislation Case Files at the Gerald R. Ford Presidential Library
DF TINE
PRESIDENT
OFFICE
OF
EXECUTIVE OFFICE OF THE PRESIDENT
UNITED
OFFICE OF management AND BUDGET
SECUTIVE
STATES
WASHINGTON, D.C. 20503
OCT 9 1976
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Resolution S.J.Res. 126 - Extension of
the Interstate Compact to Conserve Oil and
Gas
Sponsors - Sen. Jackson (D) Washington and
Sen. Johnston (D) Louisiana
Last Day for Action
October 15, 1976 - Friday
Purpose
Grants congressional consent, as required by the Consti-
tution of the United States, to extend the Interstate
Compact to Conserve Oil and Gas between 29 oil and gas
producing States and six associate member States.
Agency Recommendations
Office of Management and Budget
Approval
Department of the Interior
Approval
Federal Energy Administration
No objection(Informally)
Department of Justice
No objection
Department of State
No objection
Discussion
Under the Interstate Compact to Conserve Oil and Gas,
the signatory States are bound to enact laws to accom-
plish certain specified types of oil or gas waste
prevention, to deny access to commerce of oil produced
2
in violation of its conservation statutes and to provide
stringent penalties for the waste of oil or gas. The
Compact also established an Interstate Oil Compact Com-
mission composed of one member from each signatory State.
The Compact was originally executed by six member States
and consented to by Congress, as required by Article I,
Section 10, Clause 3 of the U.S. Constitution, in 1935.
The Compact has now grown to include 29 oil and gas pro-
ducing States and six associate member States. Congress
has consented to extensions of the Compact at 2-year
intervals from 1935 to 1972, the most recent consent
having expired on September 1, 1974. Thus, the Compact
has been without the congressional consent required by
the Constitution for over 25 months.
The enrolled bill would grant congressional consent to
an extension and renewal of the Interstate Compact to
Conserve Oil and Gas from September 1, 1974 to December 31,
1978.
In its attached enrolled bill letter, Interior notes that
energy conservation is becoming increasingly important
in our efforts to maximize the use of our available re-
sources, and the Department concludes that:
"
The Interstate Oil Compact Commission,
which operates at no cost to the Federal
Government for its operations, has played a
very prominent role in energy resource con-
servation and can be relied upon in the
future to continue to do so. We believe,
therefore, that extension of the Compact,
as provided in Senate Joint Resolution 126,
would be in the national interest."
Ohein
Paul H. O'Neill
Acting Director
Enclosures
OF INTERIOR
United States Department of the Interior
OFFICE OF THE SECRETARY
March
3,
1849
WASHINGTON, D.C. 20240
OCT 5 - 1976
Dear Mr. Lynn:
This is in response to your request for the views of this Department
with respect to S.J. Res. 126, an enrolled bill "Consenting to an
extension and renewal of the interstate compact to conserve oil and
gas.
"
We recommend that S.J. Res. 126 be enacted.
S.J. Res. 126 would provide Congressional consent to the extension of
the interstate compact until December 1978. The Compact was originally
ratified by six member States and approved by Congress in 1935, a time
in our history when major oil field discoveries, unsophisticated
technology, and the subsequent glut of oil and gas supplies resulted
in substantial waste of oil and gas, in oil prices as low as ten cents
a barrel, and in contamination of the topsoil and of underground water
supplies. The oil producing States immediately concerned agreed on
the urgency of some cooperative effort to deal with these problems.
Thus, they entered into a compact whose articles of agreement include
the following:
"The purpose of this Compact is to conserve oil and gas
by the prevention of physical waste thereof from any
cause. (Article II) and: "It is not the purpose of
this Compact to authorize the States joining herein
to limit the production of oil or gas for the purpose
of stabilizing or fixing the price thereof, or create
or perpetuate monopoly, or to promote regimentation,
but is limited to the purpose of conserving oil and
gas and preventing the avoidable waste thereof within
reasonable limitations." (Article v).
The Compact has been extended twelve times since 1935. Its membership
has grown from the six original States to 29 producing States and 6
associate member States. While the domestic energy supply situation
has been drastically altered since 1935, the purpose of the Compact
has remained unchanged.
With the energy crisis of 1973 came two basic realizations: First
came the awareness, albeit painful at the time, of the importance of
REVOLUTION
AMERICAN
BICENTENNIAL
1776-1976
oil and gas in sustaining our Nation's standard of living. Second
came the realization that the Federal Government must of necessity
expand its role in assuring future adequate domestic supplies of
energy. Despite strenuous efforts by industry and Government to
move the Nation toward full-scale utilization of non-conventional
fuels, the fact is that until 1985 and even beyond, the United States
will continue to rely on petroleum and natural gas as major energy
sources. This, coupled with the fact that petroleum production has
steadily declined since its peak in 1970, points to the continuing
need to prevent wherever possible the waste of our oil and gas
resources.
Throughout its history, the Interstate Oil Compact Commission, the
administrative arm of the interstate compact, has served as an
advisory body, providing a forum for discussion and cooperation
among the producing States in their efforts to prevent the waste
of energy resources and to promote efficient practices in the
production of oil and gas. Although the Governors of the member
States comprise the Commission itself, most of the actual work is
conducted by committees whose members are selected on the basis
of their legal, technical, or engineering capabilities. The
committee members have undertaken research in such areas as
technological and scientific advancements in production, secondary
and tertiary recovery, pressure maintenance, leasing, physical and
underground waste, conservation regulatory practices, and petroleum
resources.
The Federal Government has benefited from the experience and
expertise accumulated through the years by the Interstate Oil Compact
Commission. For instance, the Commission cooperated with the Federal
Power Commission in eliciting from State agencies not only necessary
statistical data but also staff assistance for a study the FPC was
undertaking on natural gas reserves. Upon suggestion by the Depart-
ment of the Interior, the Interstate Oil Compact Commission conducted
a comprehensive study of conservation of oil and gas in the United
States. This study is periodically updated by the Commission.
These are but two examples of where the Interstate Oil Compact
Commission has served as a vital communication link, not only among
member States, but also between the Federal and State Governments.
As for its future role, the Commission can provide a service to the
Nation by continuing its research efforts in enhanced recovery
technologies. Close to 90 percent of the United States' demonstrated
petroleum reserves are onshore. However, the chief sources of
2
onshore petroleum production, except for Alaska, will require
enhanced recovery from existing wells. In 1935, it was estimated
that less than 10 percent of the oil in place was being extracted
from the average reservoir due to poor conservation and limited
technology. Today, that figure is greater than 32 percent. For
every percentage point increase in recovery capability, it has
been estimated that we can increase available reserves by another
4 billion barrels.
An equally important contribution which can be made by the Commission
is in the field of end-use conservation; that is, in the promotion of
efforts designed to minimize waste of energy resources by consumers.
Since the Compact was last extended in 1972 the Commission has moved
more and more in this direction. Every resolution, with the exception
of one, adopted by the Commission before the Attorney General's
latest report to Congress and the Executive went to print, was
concerned with the wise and efficient use of energy by the consumer.
In short, the Interstate Oil Compact Commission, which operates at
no cost to the Federal Government for its operations, has played
a very prominent role in energy resource conservation and can be
relied upon in the future to continue to do so. We believe,
therefore, that extension of the Compact, as provided in Senate
Joint Resolution 126, would be in the national interest.
Because of the past and prospective benefits to the Nation as a result
of the Compact, we recommend that S.J. Res. 126 be enacted and that
the bill be signed.
Sincerely yours,
Assistant Secretary of the Interior
William L. Fisher
Honorable James T. Lynn
Director, Office of
Management and Budget
Washington, D. C.
3
departmenT OF STATE
Washington, D.C. 20520
OCT 6 1976
Honorable James T. Lynn
Director
Office of Management and Budget
Washington, D. C.
Dear Mr. Lynn:
I refer to Mr. James Frey's communication
of October 1 requesting the Department of State's
views on enrolled bill S.J. Res. 126. The
Department of State perceives no objection to
the joint resolution consenting to extension and
renewal of the interstate compact of 1935 to
conserve oil and gas. We would defer to the
agencies concerned with the management and
regulation of US domestic oil and gas reserves
for analysis of the impact of the extension of
the compact among the states.
Sincerely,
Jones
Kempton B. Jenkins
Acting Assistant Secretary
for Congressional Relations
ASSISTANT ATTORNEY GENERAL
LEGISLATIVE AFFAIRS
Department of Justice
Washington, D.C. 20530
October 6, 1976
Honorable James T. Lynn
Director
Office of Management and Budget
Washington, D. C. 20503
Dear Mr. Lynn:
In compliance with your request, I have examined a
facsimile of the enrolled bill S.J. Res. 126 (94th Cong.,
2d Sess.), "Consenting to an extension and renewal of the
Interstate Compact to Conserve Oil and Gas."
The resolution proposes to grant the consent of
Congress to another extension of the Interstate Compact
to Conserve Oil and Gas, from September 1, 1974 to
December 31, 1978. The Compact was originally executed in
1935 for a two year period and thereafter successively
renewed for varying terms. It is intended to foster action
by oil producing States to conserve resources of oil and
gas by ending wasteful production practices.
Section 2 requires a continuation of periodic reports
by the Attorney General for the duration of the Compact as
to whether or not the activities of the Interstate Oil Com-
pact Commission and of the States under the provisions of
such Compact have been consistent with the purposes as set
out in Article V of the Compact. This is essentially the
same report requirement which has been imposed from 1955 to
1972. The Attorney General also shall review the activities
of any advisory committees to the Commission and the States
and report to Congress prior to the expiration of the Compact
as to whether the activities of any such advisory committees
could tend to create or maintain situations inconsistent with
the antitrust laws.
While we have previously questioned the utility of these
periodic reports (we think it would be more useful to report
to Congress only when we perceive antitrust problems in the
activities of the Compact and its advisory committees), the
Department of Justice does not object to Executive approval
of this bill.
Wellow
Michael M. Uhlmann
Assistant Attorney General
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
Date: October 11
Time: 385pm
FOR ACTION: Max Friedersdorf on cc (for information): Jack Marhh
George Humphreys
Ed Schmults
Bobbie Kilbegg the
Glenn Schleede
Steve McConahey defers
FROM THE STAFF SECRETARY
DUE: Date: Humphr
Time: 530pm
SUBJECT:
S.J. Res. 126-Extension of the Interstate Compact to
Conserve Oil and Gas
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
-
REMARKS:
please return to judy johnston,ground floor west wing
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
K. R. COLE, JR.
telephone the Staff Secretary immediately.
For the President
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
Date: October 11
Time: 345pm
FOR ACTION: Max Friedersdorf
cc (for information): Jack Marsh
George Humphreys
Ed Schmults
Bobbie Kilberg
Glenn Schleede
Steve McConahey
FROM THE STAFF SECRETARY
DUE: Date: October 11
Time: 530pm
SUBJECT:
S.J. Res. 126-Extension of the Interstate Compact to
Conserve Oil and Gas
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X
For Your Comments
Draft Remarks
REMARKS:
please return to judy johnston, ground floor west wing
appove Debby 10/11/76
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
James M. cause
For the President
telephone the Staff Secretary immediately.
THE WHITE HOUSE
/
ION MEMORANDUM
WASHINGTON
LOG NO.:
Date: October 11
Time: 345pm
FOR ACTION: Max Friedersdorf
cc (for information): Jack Marsh
George Humphreys
Ed Schmults
Bobbie Kilberg
Glenn Schleede
Steve McConahey
FROM THE STAFF SECRETARY
DUE: Date:
October 11
Time: 530pm
SUBJECT:
S.J. Res. 126-Extension of the Interstate Compact to
Conserve Oil and Gas
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X
For Your Comments
Draft Remarks
REMARKS:
please return to judy johnston, ground floor west wing
and
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
James M. Came
delay in submitting the required material, please
yor the President
telephone the Staff Secretary immediately.
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
Date: October 11
Time: 345pm
FOR ACTION: Max Friedersdorf
cc (for information): Jack Marsh
George Humphreys
Ed Schmults
Bobbie Kilberg
Glenn Schleede
Steve McConahey
FROM THE STAFF SECRETARY
DUE: Date:
October 11
Time: 530pm
SUBJECT:
S.J. Res. 126-Extension of the Interstate Compact to
Conserve Oil and Gas
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X
For Your Comments
Draft Remarks
REMARKS:
please return to judy johnston, ground floor west wing
Decommend
Approval
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
James M. Came
delay in submitting the required material, please
For the President
telephone the Staff Secretary immediately.
THE WHITE HOUSE
WASHINGTON
October 12, 1976
MEMORANDUM FOR:
JIM CANNON
FROM:
MAX L. FRIEDERSDORF m.6.
SUBJECT:
S.J.Res. 126 - Extension of the
Interstate Compact to Conserve Oil & Gas
The Office of Legislative Affairs concurs with the agencies
that the subject resolution be signed.
Attachments
Calendar No. 729
94TH CONGRESS
}
SENATE
REPORT
2d Session
No. 94-771
CONSENTING TO EXTENSION OF INTERSTATE COMPACT
TO CONSERVE OIL AND GAS
APRIL 29, 1976.-Ordered to be printed
Mr. JOHNSTON, from the Committee on Interior and Insular Affairs,
submitted the following
:
REPORT
[To accompany S.J. Res. 126}
The Committee on Interior and Insular Affairs, to which was re-
ferred the joint resolution (S.J. Res. 126) consenting to an extension
and renewal of the interstate compact to conserve oil: and gas, having
considered the same, reports favorably thereon with amendments
and recommends that the joint resolution as amended do pass.
The amendments are as follows:
1. Page 1, lines 4-5, strike "until Congress withdraws its consent,"
and insert "to December 31, 1978,".
2. Page 12, line 1, insert " (a) after "Sec. 2".
3. Page 12, line 2, strike continue to make biannual" and insert
"make a biennial".
4. Page 12, line 2, strike "as provided" and all of line 3.
5. Page 12, line 8. Add the following
(b) The Attorney General, shall also review the activities
of any advisory committees to the Commission and the States,
and not later than June 30, 1978, report to Congress as to
whether the activities of any such advisory committees could
tend to create or maintain situations inconsistent with the
antitrust laws of the United States.
I. PURPOSE
S. J. Res. 126 would extend, until December 31, 1978, the consent of
Congress to the Interstate Compact to Conserve Oil and Gas.
57-010
2
3
II. BACKGROUND AND NEED
gressional consent required by Article I, Section 10, Clause 3 of the
Constitution for over 18 months.
The Interstate Compact to Conserve Oil and Gas was originated by
The 1972 extension called for a report by the Attorney General
six member States and consented to by the Congress in 1935. Its mem-
"as to whether the activities of the Interstate Oil Compact Commis-
bership has now grown to include 30 oil and gas producing States and
sion and the States under the provisions of such compact have been
six associate member States. These are:
consistent with the purposes as set out in article V of such compact,
Member States
and have been limited to activities related directly to the immediate
Alabama, Alaska, Arizona, Atkansas, California, Colorado, Florida,
purpose of such compact as set out in Article II of such compact."
Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan,
The Attorney General's report was to be submitted no later than
Mississippi, Montana, Nebraska, Nevada, New. Mexico, New York,
June 80, 1974. However, the Committee did not receive it until
North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennes-
August, 1975. The Attorney General concluded:
see, Texas, Utah, West Virginia and Wyoming.
From our individual perspective, however, and based on
Associates
our close surveillance of Compact activities in terms of our
Georgia, Idaho, North Carolina, Oregon, South Carolina, and
report responsibilities, we see no occasion to recommend
Washington.
that Congress withhold its approval to renewal of the
When the Compact was originally ratified, major oil field discover-
Compact.
ies and the subsequent glut of oil and gas supplies had resulted in
The findings and conclusions of the Attorney General's report are
substantial loss of oil at the surface, in wholesale flaring of gas, and in
set out below under Executive Communications.
oil prices as low as 10 cents a barrel. As a result, there was contamina-
tion of the topsoil and containination of Underground water supplies.
III. LEGISLATIVE HISTORY
The oil producing States immediately concerned agreed on the need
for some cooperative effort to deal with these problems.
S.J. Res. 126 was introduced by Senator Jackson on September 11,
The purpose of the Compact is "to conserve oil and gas by the pre-
1975, at the request of the Interstate Oil Compact Commission. Hear-
vention of physical waste thereof from any cause." (Article II.)
ings were held on March 24, 1976.
The Compact expressly states that:
It is not the purpose of this compact to authorize the States
Iv. COMMITTEE RECOMMENDATIONS AND TABULATION OF VOTES
joining herein to limit the production of oil or gas for the
purpose of stabilizing or fixing the price thereof, or create
The Senate Committee on Interior and Insular Affairs, in open
or perpetuate monopoly, or to premote regimentation, but is
business session on April 28, 1976, by unanimous vote of a quorum
limited to the purpose of conserving oil and gas and prevent-
present recommends that the Senate pass S.J. Res. 126 if amended
as described herein.
ing the avoidable waste thereof within reasonable limita-
tions. (Article V.)
V. COMMITTEE AMENDMENTS
The Compact birth each signatory State to eriact laws to accomplish
certain specified types of oil or gas waste-prevention, It also binds them
1. This amendment limits the extension of Congressional consent
to enact measurés to deny access to commerce of oil produced in viola-
to December 81, 1978, or roughly 4 years from the expiration of last
tion of its valid conservation statutes, and to provide stringent penal-
consent to extension. (September 1j 1974.) Previous extensions have
ties for waste of 6H gas. Since most States already had enacted such
been limited to R years. As introduced, SJ. Res. 126 provided for an
measures prior to entering the Compact, the key substantive provision
unlimited extension.
was that establishing an Interstate Oil Compact Commission composed
2, 3, and 4. These are technical conforming amendments.
of one member from each signatory State. Its duty was:
5. This calls for a special report from the Attorney General on
to make inquiry and ascertain from time to time such
the activities of advisory committees used in connection with activities
methods, practices, circumstatices, and conditions &s friay be
related to the purposes of the Compact.
disclosed for bringing about conservation and the prevention
Oil and gas industry personnel frequently meet to advise the Com-
of physical waste of oil and gas, and at such intervals as said
pact Commission and its member States. The Committee believes that
Commission deems berreficial it shall report its findings and
the Attorney General should carefully review the activities of these
recommendations to the several States for adoption or
advisers to see if they are consistent with the antitrust laws.
rejection.
VI. Cost AND BUDGETARY CONSIDERATIONS
Congress has consented to extensions of the Compact at 2-year inter-
vals from 1935 to 1972. The most recent Congressional consent expired
Enactment of S.J. Res. 126 will have no cost or budget implications.
on September 1, 1974. Thus, the Compact has been without the Con-
No expenditure of Federal funds is involved.
4
5
VII. EXECUTIVE COMMUNICATIONS
Throughout its history, the Interstate Oil Compact Commission, the
The pertinent legislative. reports and communications received by
administrative arm of the interstate compact, has served as an ad-
the Committee from the Department of the Interior, Office of Manage-
visory body, providing a forum for discussion and cooperation among
ment and Budget, and the Department of Justice in relation to
the producing States in their efforts to prevent the waste of energy
S.J. Res. 126 are set out below:
resources and to promote efficient practices in the production of oil
and gas. Although the Governors of the member States comprise the
DEPARTMENT OF THE INTERIOR,
Commission itself, most of the actual work is conducted by commit-
OFFICE OF THE SECRETARY,
tes whose members are selected on the basis of their legal, technical,
Washington, D.C., March 4, 1976.
or engineering capabilities. The committee members have undertaken
Hon. HENRY M. Jackson,
research in such areas as technological and scientific advancements in
Chairman, Committee on Interior and Insular Affairs, U. S. Senate,
production, secondary and tertiary recovery, pressure maintenance,
Washington, D.C.
leasing, physical and underground waste, conservation regulatory
DEAR MR. CHAIRMAN This is in response to your request for the
practices, and petroleum resources.
views of this Department with respect to S.J. Res. 126, a Senate joint
The Federal Government has benefitted from the experience and
resolution, "Consenting to an extension and renewal of the interstate
expertise accumulated through the years by the Interstate Oil Com-
compact to conserve oil and gas."
pact Commission. For instance, the Commission cooperated with the
We recommend that S.J. Res. 126 be enacted.
Federal Power Commission in eliciting from State agencies not only
The Compact was originally ratified by six member States and ap-
necessary statistical data but also staff assistance for a study the FPC
proved by Congress in 1935, a time in our history when major oil
was undertaking on natural gas reserves. Upon suggestion by the De-
field discoveries and the subsequent glut of oil and gas supplies re-
partment of the Interior, the Intertate Oil Compact Commission con-
sulted in substantial loss of oil at the surface, in wholesale flaring of
ducted a comprehensive study of conservation of oil and gas in the
gas, and in oil prices as low as ten cents a barrel. As a result, there was
United States. This study is periodically updated by the Commission
contamination of the topsoil and contamination of underground water
and, I believe, is undergoing revision at present. These are but two
supplies. The oil producing States immediately concerned agreed on
examples of where the Interstate Oil Compact Commission has served
the urgency of some cooperative effort to deal with these problems.
as a vital communication link, not only among member States, but
also between the Federal and State Governments.
Thus, they entered into a compact whose articles of agreement read as
As for its future role, the Commission can provide a service to the
follows:
"The purpose of this Compact is to conserve oil and gas by the pre-
Nation by continuing its research efforts in enhanced recovery tech-
vention of physical waste thereof from any cause. It is not the purpose
nologies. Close to 90 percent of the United States' demonstrated
of this compact to authorize the States joining herein to limit, to
petroleum reserves are onshore. However, the chief sources of onshore
authorize the States joining herein to limit the production of oil or
petroleum production, except for Alaska, will require enhanced re-
covery from existing wells. In 1935, it was estimated that less than
gas for the purpose of stabilizing or fixing the price thereof, or create
or perpetuate monopoly, or to promote regimentation, but is limited to
10 percent of the oil in place was being extracted from the average
reservoir due to poor conservation and limited technology. Today,
the purpose of conserving oil and gas and preventing the avoidable
that figure is greater than 32 percent. For every percentage point
waste thereof within reasonable limitations.
increase in recovery capability, it has been estimated that we can
The Compact has been extended twelve times since 1935. Its mem-
increase available reserves by another 4 billion barrels.
bership has grown from the six original States to 29 producing States
An equally important contribution which can be made by the Com-
and 6 associate member States. While the domestic energy supply situ-
mission is in the field of end-use conservation; that is, in the promotion
ation has been drastically altered since 1935, the purpose of the Com-
of efforts designed to minimize waste of energy resources by con-
pact has remained unchanged.
sumers. Since the Compact was extended in 1972, it appears that the
With the energy crisis of 1973 came two basic realizations: First,
Commission is, in fact, moving more and more in this direction. It was
came the awareness, albeit painful at the time, of the importance of
interesting to note that every resolution, with the exception of one,
oil and gas in sustaining our Nation's standard of living. Second,
adopted by the Commission before the Attorney General's latest
came the realization that the Federal Government must of necessity
report to Congress and the Executive went to print, had been con-
expand its role in assuring future adequate domestic supplies of
cerned with the wise and efficient use of energy by the consumer.
energy. Despite strenuous efforts by industry and Government to
In short, the Interstate Oil Compact Commission, which operates at
move the Nation toward full-scale utilization of non-conventional
no cost to the Federal Government for its operations, has played a
fuels, the fact is that until 1985 and even beyond, the United States
very prominent role in energy resource conservation and can be relied
will continue to rely on petroleum and natural gas as major energy
upon in the future to continue to do so. We believe, therefore, that
sources. This, coupled with the fact that petroleum production has
extension of the Compact, as provided in Senate Joint Resolution 126,
steadily declined since its peak in 1970, points to the continuing need
would be in the national interest.
to prevent wherever possible the waste of our oil and gas resources.
7
6
The Office of Management and Budget has advised that there is no
to the immediate purpose of the Compact as set out in Article II of
objection to the presentation of this report from the standpoint of the
the Compact.
Administration's program.
The Department of Justice has no objection to the proposal for in-
Sincerely yours,
definite extension of the Compact, in view of the inclusion of section 8
WILLIAM FISHER,
of the Joint Resolution. That provision expressly reserves to Congress
Assistant Secretary of the Interior.
the right to alter, amend or repeal the consent resolution. However, in
view of the proposal to enact the resolution as an indefinite extension,
EXECUTIVE OFFICE OF THE PRESIDENT,
the Department strongly urges careful reconsideration of the pro-
visions of Section 2.
OFFICE OF MANAGEMENT AND BUDGET,
Washington, D.O., March 29, 1976.
In responding to a request for views on a proposal for a similar
Hon. HENRY M. JACKSON,
indefinite extension of the Compact in 1972, the Department sug-
Chairman, Committee on Interior and Insular Affairs, U.S. Senate,
gested modification of the requirement for regular reports. We urged
that there be substituted for this requirement a continued surveillance
Dirksen Senate Office Building, Washington, D.C.
by the Department with a report to be submitted to the Congress only
DEAR MR. CHAIRMAN: This is in résponse to your request of Janu-
if the activities of the States appear inconsistent with the purposes of
ary 8, 1976, for the views of the Office of Management and Budget on
the Compact. See Interstate Compact on Oil and Gas (12th Exten-
Senate Joint Resolution 126, "Consenting to an extension and re-
sion), Hearings Before the Subcommittee on Communications and
newal of the interstate compact to conserve oil and gas."
Power of the House Committee on Interstate and Foreign Commerce,
The Office of Management and Budget concurs in the views ex-
pressed in the reports of the Departments of the Interior and Justice
92d Cong., 2d Sess. 26-27 (1972). We continue to adhere to that view.
The various consent resolutions since 1955 have required reports by
and, accordingly, has no objection to enactment of Senate Joint Reso-
the Attorney General, usually on an annual basis, as to the impact of
lution 126 with the amendments to section 2 proposed by the Depart-
State activities under the Compact on competition in the oil industry.
ment of Justice.
The reports so far filed have reviewed in some detail the activities of
Sincerely yours,
the States under the Compact and the independent structure of State
JAMES M. FREY,
conservation regulation governing the production of oil, and the rele-
Assistant Director for
vance of these factors to competition in the oil industry. This struc-
Legislative Reference.
ture has not significantly changed in many years, and the activities of
the States under the Compact have not changed in any substantial way
DEPARTMENT OF JUSTICE,
which suggests the need for annual reports. This is particularly true
Washington, D.C., April6, 1976.
with respect to the activities of the States taken under the authority
Hon. HENRY M. Jackson,
of the Compact, which, as consistently noted by the various Attorneys
Chairman, Committee on Interior and Insular Affairs,
General since 1955, have only a remote and indirect impact on oil in-
U.S. Senate, Washington, D.O.
dustry competition or on the levels of oil prices or supplies.
DEAR MR. CHAIRMAN: This is in response to your request for the
In view of these considerations, we believe that any reasonable con-
views of the Department of Justice on S.J. Res. 126, consenting to
cern by the Congress as to the competitive impact of this interstate
an extension and renewal of the interstate compact to conserve oil and
agreement could be fully satisfied by a requirement that this Depart-
ment maintain continuing surveillance, with reports to be filed from
gas.
The bill proposes to grant the consent of Congress to another exten-
time to time concerning any activities of the Interstate Oil Compact
sion of the Interstate Compact to Conserve Oil and Gas, this time
Commission or other State activities under the Compact which might
from September 1, 1974 until such time as Congress may withdraw its
appear to be inconsistent with the purposes of that document. To
consent. The Compact was originally executed in 1985 for a two-year
accomplish this, we recommend that section 2 be amended to read as
period, and thereafter successively renewed for varying terms. It is
follows:
intended to foster action by oil-producing States to conserve resources
"Sec. 2. The Attorney General of the United States shall continue
of oil and gas by ending wasteful production practices.
to survey the activities of the Interstate Oil Compact Commission
Section 2 requires a continuation of periodic reports by the Attor-
and the States under the Interstate Compact to Conserve Oil and Gas
ney General for the duration of the Compact as to whether or not the
and shall report to Congress from time to time any activities by the
activities of the Interstate Oil Compact Commission and of the States
Commission or the States which appear to be inconsistent with the
under the provisions of such Compact have been consistent with the
purposes set out in Article V of such Compact."
purposes as set out in Article V of the Compact. This is essentially
We would note finally that the text of Section 2 of S. J. Res. 126
the same report requirement which has been imposed from 1955 to
contains two apparent errors. The first refers to a requirement for a
1972. However, the last Compact extension in 1972 expanded the scope
"biannual" report (every six months) rather than a "biennial" report
of report to include also whether these activities were related directly
(every two years). Legislative history since 1955 indicates that the
latter was intended. The second error is in the language that the
9
8
report required of the Attorney General; it was still to be "whether
Attorney General "shall continue to make" a biannual (or biennial)
the activities of the States under the provisions of such Compact have
report "as provided in section 2 of Public Law 92-322, 92d Con-
been consistent with the purposes as set out in Article V of such
gress However, that legislation actually called for a single
Compact." 48
report by the Attorney General at a specified time, not a series of
In the House, however, hearings were not held until April, 1972.
reports.
Then, considerable concern was expressed to Compact representatives
The Office of Management and Budget has advised that there is no
over certain activities of the IOCC, particularly those dealing with
objection to the submission of this report from the standpoint of the
Federal Government policy in the field of oil and gas.44 As subse-
Administration's program.
quently stated in the report of the Committee on Interstate and For-
Sincerely,
eign Commerce, Congressmen were concerned over "activities on the
MICHAEL M. UHLMANN,
part of the Interstate Oil Compact Commission which appear to fall
Assistant Attorney General.
outside, or at best, have a very tenuous connection with, the limited
purposes of the Compact to which the Congress has consented." 45
REPORT OF THE ATTORNEY GENERAL
The Committee reported that, as referred to in the Attorney Gen-
eral's report submitted on June 18, 1971, these "extra-curricular"
Pursuant to Section 2(a) of the Joint Resolution of June 30, 1972,
activities involved the following matters:
Consenting to an Interstate Compact to Conserve Oil and Gas as of
(1) opposition to tax reform legislation designed to reduce the oil
June 30, 1974. (Part III.)
depletion allowance;
(2) opposition to changes in the oil import quota system;
III. FINDINGS AND CONCLUSIONS
(3) opposition to assumption by the Federal Government of con-
trol over production of oil and gas on the outer continental shelf;
After this review of Compact Commission activities over recent
years, we must consider whether these varied activities meet the dual
(4) seeking amendments to Federal legislation dealing with the
establishment of natural gas rates;
criteria set by the Congress for our report. Are they consistent with
(5) urging the Federal Power Commission to abandon area pricing
the antiprice-fixing and anti-monopoly purposes of Article V of the
Compact? Are they also related directly to the immediate purpose of
for natural gas and to authorize immediate increases in gas rates; and
the Compact set out in Article II: conservation of oil and gas by the
(6) becoming a focal point for formulating State positions on na-
tional energy policies.
prevention of physical waste from any cause? We turn first to the
latter, the more difficult question.
These matters had been the frequent subjects of resolutions adopted
by the Commission. It was clear that the House Committee's concern
A. Activities in relation to Article II
was not with the general range of IOCC work or the activities by com-
In determining whether the activities of the IOCC and the States
mittees in its name. It was limited to the semiannual resolutions
under the Compact have been limited to activities related directly to
adopted by the Commission which usually orignated in the Energy
the Compact's immediate purpose set forth in Article II, it is useful
Resources Committee and were forwarded via the Resolutions
first to consider the legislative context of the current report require-
Committee.
ment. That review makes clear that the key background question is
The Congressional subcommittee had questioned the IOCC's Gen-
the meaning of the phrase "physical waste," as set forth in Article II.
eral Counsel about the relationship of these activities to the stated pur-
Thus, we next consider how the term has been used by the Compact
poses of the Compact set forth in Articles II and V. He asserted that
Commission in recent years in relation to its meaning in the context of
all of these activities were related to the Compact purposes and that
the Compact as originally drafted. Finally, we appraise the degree
the pricing of oil and gas affected the conservation of oil and gas since
"
to which IOCC activities conform to the legislative standard for our
pricing is definitely a conservation tool
He was contend-
report.
1. Congressional Amendment of the Report Requirement. S.J. Res.
48 However, the Senate Interior Committee rejected a recommendation by the Depart-
ment of Justice that although our surveillance should be continued, statutory report by
72 and H.J. Res. 586, identical measures to renew Congressional con-
the Attorney General in future be made only from time to time as circumstances war-
ranted. See, S. Rep. No. 356, op. cit., 8.
sent to the Interstate Compact to Conserve Oil and Gas and to continue
" Interstate Compact on Oil and Gas (12th Extension), Hearings Before the Subcom-
it in effect until such time as Congress withdraws its consent, were
mittee on Communications and Power of the House Committee on Interstate and Foreign
Commerce, 92d Cong., 2d Sess. 56-67 (1972).
introduced in Congress in April, 1971. After hearings, the Senate Com-
H.R. Rep. No. 1098, 92d Cong., 2d Sess. 4 (1972). During the hearings the sub-
mittee on Interior and Insular Affairs reported the resolution with
committee had also been concerned over the expressed view of the Compact Commission's
General Counsel that the Compact did not in fact require the consent of the Congress
minor amendmnets.41 and as so amended it passed the Senate on
because the Compact agency performed merely advisory functions. In response to its
request, the Acting Attorney General submitted a supplemental report on the legislation
August 6, 1971.* The resolution was amended to extend the Compact
which took issue with this contention. As a result, on the basis of interpretations of the
for a three-year period in lieu of the indefinite extension originally
Constitution's Compact Clause by the judiciary and legal scholars quoted in the Acting
Attorney General's report, as well as on the practical construction by the Congress ex-
provided. But no change was made in the traditional substance of the
pressed in its initial consent in 1935 and 1ts periodic extensions and renewals to this day,
the Committee report concluded that the Interstate Compact to Conserve Oil and Gas 18
subject to the Commerce Clause and thus does require Congressional consent. Id. at pp.
42 R. Ren. No. 356, 92d Cong.. 1st Sena. (1971).
3, 4.
at 117 Cong. Rec. 30215-30217 (1971).
S. Rept. 94-771-2
10
11
ing; in effect, that these policy recommendations came within the scope
Midyear Meeting and others since have been prefaced by a definition
of "prevention of physical waste thereof from any cause," as correctly
of "prevention of physical waste from any cause" as found in Article
understood. He was also pointing out that while any action attempting
II:
to control prices was forbidden to the Compact Commission, it still
"The Compact believes that waste includes the failure to find,
must recognize that the level of prices for oil or gas at a particular
develop and direct the full potential domestic petroleum resources to
time was a factor impacting in maximum ultimate recovery and pos-
fill the present and future consumer needs. Such failure is not limited
sible physical waste.
tb operating practices of those who develop the petroleum resources,
Disagreeing, the House Committee report expressed the opinion
nor the action or lack of action by state regulatory agencies, but can
that these activities of the Commission and its officials transcended
result from federal policies as well."
the limited purposes for which the Compact was entered into and
This language is very broad and general. Rather than clarifying
consented to by the Congress. In other words, they "fall outside,
what the Commission means by waste, the explanation raises more
or at best have a Very tenuous connection with" what the Committee
took to be the meaning of "prevention of physical waste from any
problems.
For example, the "full potential" domestic petroleum resources to
cause."
be found, developed and directed to fill consumer needs certainly
Rather than recommending that Congress withhold its consent to
would include all producing reservoirs in the United States and all
extension of the Compact, the Committee decided on an amendatory
Warning to assure that henceforth the Compact Commission would
those recently discovered and still in the process of definition. But it
would also seem to include all underlying oil not yet discovered and
limit its activities strictly to Article II purposes as it conceived
them, It therefore further amended the resolution to require that the
perhaps never to be discovered. Under this interpretation failure to
Attorney Geheral álso report on whether the activities of the Commis-
discover, or cause to be discovered, every last pocket of oil or gas
locked beneath our soil dr waters would seem to expose the oil com-
sion and the States have been limited to activities related directly to the
immediate purpose of the Compact as set out in article II. It seems
panies, the State regulatry agencies and the Federal Government to
clear that these more restrictive terms were intended to guard against
a charge by the IOCC that they are engaged in physical waste.
Again; the phrase "full potential" resources would seem to mean
the Commission's continued issuance of resolutions on subjects which
the Committee regärded, as having merely a very indirect or "tenuous"
not Ohly finding all the oil underlying the United States, but develop-
relationship to Article II.
ing all of it. This might mean, on the one hand, that an operator's
In further explanation of its course the Committee stated that
abandonment of a discovery well whose show of oil appears less than
sufficient for commercial development is an exercise of physical waste.
"[T]hese views are not designed in any way to prevent State
officials, members of the oil and gas industry or other individuals from
It would seem under this reading that the State agency or even the
Federal Government should be required to forbid this abandonment-
expressing their views on the aforementioned subjects. The Com-
mittee feels, however, that concerted action under the aegis of the
a step they have never thought of taking.
On the other hand, does the phrase mean that all producing re-
Compact with regard to various aspects of this Nation's energy poli-
servoirs must be drained of all their oil? In hearings on the last ex-
cies on the part of State officials, industry members, and other in-
dividuals are not in the national interest. Such concerted action is
tension of the Compact, the IOCC's chairman, while conceding much
more had to be done, pointed out with pride that recovery from the
likely to put special producer interests against special consumer inter-
average reservoir had risen from 10 percent of the oil in place when
ests, thus making ihore difficult rather than facilitating the formula-
tion by the Congress of urgently needed, long-range energy policies." 46
the Compact was organized in 1935 to a present level of 36 percent-
three-and-a-half times better. Under this interpretation it would ap-
As SO ämended; thé House considered and passed the résolution
and the Senate subsequently cóncurred." The resolution became law
pear that the producers and governmental agencies-including the
on June 30, 1972.
IOCC-are guilty of physical waste to the extent of the remaning 64
2. Physical Waste Defined. At the Commission's Midyear Meeting
percent.
immediately following issuance of the Committee report and House
In practice; it is unlikely that technology can ever be developed to
amendment many were privately, upset; But believed the Commission
attain "full" recovery. Thus, the word "potential" may well be in.
was in no position to comment officially. It was generally felt that the
tended to modify the phrase to mean only the maximum practicable
Commission had not exceeded the scope of the Compact purpose,
under such future technology. But the cost of production under such
that its activities had been entirely proper, and that the House amend-
increasingly sophisticated and effective technology is likely to rise to
ment would not affect the activities of the IOCC. Still, open opposition
increasingly unacceptable levels. Under such circumstances, it would
seem that the IQCC would not be justified in continuing to take action
to the House amendment might be considered an admission of wrong-
doing. Accordingly, the Commission's response was indirect and
or advocate action in the name of physical waste prevention, regard-
less of cost, in order tb assure that all oil in this country Has been
circumspect.
The Commission has continued to issue similar resolution on the
recovered.
Similar problems exist with the word "direct": the failure to direct
same subject-matter as before. But the resolution adopted at that
resburces-bice found and developed-to fill present and future heeds.
" Id. at pp. 4-5.
47 118 Cong. Rec. 19623-19625, 21913 (1972).
48 Hearings, op. cit., p. 52
12
This may have a connotation of above-ground physical losses in the
13
course of transmission from extraction through refining and distri-
bution to the consumer. On the other hand, it may refer alternatively
Two forms of waste listed, for example, were the venting or wasteful
to a failure to establish an appropriate balance as between present and
burning of gas from a natural gas well and the creation of unnecessary
future needs of consumers, or a failure to provide mechanisms to
fire hazards. The former was a common practice in those days, while
assure appropriate priorities of uses, so that petroleum resources are
the latter arose in part from open-ditch storage-and associated leak-
not "directed" to "inferior end uses." 49
age-of oil produced in a mad race to prevent underground drainage
The second sentence quoted above may be read as suggesting a bal-
by other operators. Both refer directly to the physical loss of hydro-
ance of blame for these failures constituting waste. Some could be
carbon already brought to the surface but unable to be used because of
laid to operating practices by the industry, others to inadequate State
wasteful practices.
regulatory effort, and still others to poor Federal policies. But in
There is also a catchall provision against drilling, equipping, locat-
practice most Commission action in resolutions and statements of
ing, spacing or operating wells SO as to bring about physical waste or
policy for many years past has been directed toward Federal Govern-
loss in ultimate recovery. In the context of the period, the reference
ment policies. True, the technical work of the Compact committees
to "equipping" wells referred at least in part to inadequate safety
is made available to the State agencies if they choose to use it. This
equipment to control pressures, leading to blowouts and gushing of oil,
work could be helpful in improving State agency performance, and
with attendant fire hazards; while "operating wells" included the
advocacy by the Commission.
might also be of use to the industry. But this is availability, not strong
factor of slipshod above-ground storage, leakage and loss associated
with rampant over-production.
In any event, whatever the precise range of meaning of this defini-
On the other hand, the balance of this item delt with the closely
tion, it can be agreed that it is certainly very broad. It would seem
spaced, uncoordinated drilling of a multitude of adjacent leaseholds,
to permit Compact recommendations in the name of waste prevention
where rapid production by everyone to avoid underground drainage-
or virtually every subject dealing in some way with oil or gas.
had the effect of dissipating natural reservoirs pressures and render-
This breadth of meaning is all the more remarkable in view of the
ing most of the oil in place unrecòverable. By 1935, although sophisti-
background to initial adoption of the Compact in 1935 and the plain
cated methods of secondary and tertiary recovery had not yet been
language the Compact contains. As prior reports of the Attorney
developed, petroleum engineering had already advanced to the recogni-
General and various background materials make clear, the final pro-
tion that careful management practices to preserve reservoir pressures
visions of the Compact were a blend of conflicting views of what a
would make possible over time the recovery of a much greater propor-
Compact should embody, epitomized by the positions of Governors
tion of the estimated oil in the reservoir. This concept informs the
Allred of Texas and Marland of Oklahoma. At that time the Texas
remaining forms of waste listed in Section III: operation with an
statute specifically excluded the concept of "economic waste" as a
inefficient gas-oil ratio; drowning of an oil or gas stratum with water;
basis for controls over oil production. Consequently, Governor Allred
and the generalized injunction against the inefficient, excessive or im-
viewed as inappropriate any Compact provision having the effect of
proper use of reservoir energy.
binding Texas to adopt conservation measures grounded more on
These illustrative examples of what the compact framers meant by
economic than physical factors. For this reason the language of Sec-
physical waste have several threads in common. Whether dealing with
tion II specifically limits the purpose of the Compact to the prevention
waste above ground or still in the underground reservoirs, they all
of physical waste of oil and gas.51
concern operations immediately at the wellhead; they all deal with
This interpretation is buttressed by consideration of how this pur-
practices by the operator; they all relate to oil that is already dis-
pose is applied in the following section of the Compact. Section III
covered; they all concern directly the physical loss of oil or gas
binds each State to enact or maintain laws to prevent within reason-
through destruction or rendering it unrecoverable; and they all imply
able limits six specific forms of waste. Some refer to above-ground
operations at whatever levels of recovery techniques and knowledge
waste at the well site, others to below-ground waste, and one to a mix-
of reservoir engineering are current. None implies a direct relationship
ture of both.
between physical waste and externally-imposed governmental policies
But all refer immediately to a concrete loss of a physical substance,
which might ultimately affect levels of production. In short, the Com-
rather than to economic factors such as disincentives to produce attrib-
pact's framers knowingly and specifically dealt with direct physical
utable to adverse price levels.
waste, as the term is commonly understood, with no significant admix-
ture of indirect "economic waste" factors.⁵²
resolution 40 See supra, adopted p. at 10, the for 1973 a similar Midyear unclear Meeting. statement on this theme, contained in the
50 In all the resolutions for adopted in the period under review, there was only single
The one possible exception is concern with measures to avert abandonment of marginal
recommendation all the State action. Urging the formulation of effective unitization a
or stripper wells. From the beginning this has been a traditional concern of the Compact
States It was one of a number of recommendations adopted at the 1973 laws in
as well as of the States. It is now a concern of the Federal Government. At the State level.
year. Meeting. Similarly, was repeated in the statement of policy adopted at the Annual Meeting Mid-year
the economic measures utilized have involved exemption from production limitations,
industry to these resolutions have included only occasional general exhortations that
leading to maximization of potential income from the well. At the Federal level, as epito-
production. do its part to alleviate the energy crisis by increasing exploration to and the
mixed in current price controls on crude oil. these measures involve special price relief.
In each case the rationale for this special economic treatment is that If the income
51 See First Report, pp. 48-52; Ninth Report, pp. 8-13; Interstate on Compact
from this marginal production becomes insufficient to support the operating costs of
mission, to Conserve The Ou Compact's Formative Years 37-49 (1954) Murphy, The Interatate Com-
pumping out these few barrels per day and return a fair profit. then the well will ulti-
Mississippi Bar and Gas: An Experiment in Ob-operative State Production Control, Compact 17
mately be capped and abandoned. After that is done, it is generally concluded, there would
Journal 814 (1946).
be no reasonably conceivable economic climate which would make it profitable to undertake
the heavy investment required to reopen the well. Thus a portion of known reserves,
otherwise recoverable, would be lost forever. And while this portion may be small as to each-
individual well. the number of domestic wells in this category is very large and the propor-
tion of our total production and reserves they represent is quite substantial.
14
15
3. Conformity to the Legislative Criteria. As we have suggested, the
when applied to reservoirs wholly underlying public lands. Moreover,
recent explanations by the Compact Commission of what it under-
the work of this Committee over many years has been concerned at
stands to be the scope of physical waste prevention under its charter
least as much with efforts to open to oil and gas development those
seems at odds with the plain language of the Compact and the intent
public lands presently reserved for other uses. This activity obviously
of its framers. This is not to say there is no relation between a multi-
bears no relationship to physical waste prevention.
plicity of external factors, including a variety of State, Federal and
One group whose work definitely falls outside our prescribed
foreign governmental policies, which bear on the economic climate of
criteria is the Environmental Protection Committee. No matter how
the petroleum industry, influence its rate of investment in production
beneficial its developing program may otherwise be considered or how
of known reserves and exploration for undiservered resources, and
laundable its objectives, it clearly is concerned with effects upon air,
thus in the long run affect the maximum ultimate recovery of domestic
water, wildlife and other elements of the environment rather than
oil and gas in place. Usually there is a relation, and it can be easily-if
physical waste of oil and gas. Indeed, during the 1969 House hearings
in some cases lengthily-traced,
the Compact Commission's General Counsel himself explicitly con-
Fortunately, however, the mandate for our report does not require
ceded that the scope of the Compact's purpose under the present
us to undertake such a complex tracing process for each of the Com-
charter might be inadequate to cover the work of this newly-organized
pact Commission's activities. We need not consider the exact degree
committee.
to which these activities relate to the prevention of physical waste of
Next, we conclude it is premature to consider at this time the future
oil or gas from any cause, or whether, in the words of the House Com-
activities of the Compact pursuant to the recommendations adopted at
mittee report, they "fall outside, or at best have a very tenuous con-
the 1974 Midyear Meeting. Some of these are unobjectionable in any
nection with" that Compact purpose. We are asked simply to report
event, merely intensification of existing activities clearly within the
whether the activities of the Commission and the States have been
legislative criteria. Others may be partly within or without the criteria
limited to activities related directly to the immediate purpose of the
depending on how far and in what way they may be implemented. Still
Compact, the prevention of physical waste. As so qualified, and con-
others which may clearly present problems under the criteria, such
sidering our review of the meaning of physical waste, we conclude that
as recommendation Seven to monitor "the impact of pricing and mar-
some Compact activities have been so limited and some have not.
Exet regulatory anomalies," may never to implemented at all in any
Without undertaking an item-by-item inspection it is clear that on a
meaningful way.
fair appraisal most of the work of the Compact Commission's techni-
Finally, we must consider the action by the Commission in issuing
cal committees can be considered as directly related to physical waste
resolutions and statements of policy for the guidance of member State
prevention. This would seem to apply unqualifiedly to such groups as
Governors and the Federal Government. As we have already indicated,
the Engineering Committee, the Research Committee and the Second-
this activity also involves, successively, the work of a subcommittee
ary Recovery and Pressure Maintenance Committee. The Legal Com-
of the Energy Resources Committee and most of the work of the
mittee and the Regulatory Practices Committee deal with a body of
Resolutions Committee. In recent years these resolutions have turned
conservation laws and regulations which partly concern the protection
to focus increasingly on generalized energy problems, concentrating on
of correlative rights of leaseholders and other subjects in addition to
the developing energy shortage in particular. Some of the specific
physical waste prevention. But this whole body of State regulatory
recommendations to alleviate these problems relate directly to physical
effort is SO interrelated that it would be merely quibbling to object to
waste prevention. Recommendations for research and development
activities by these committees which on occasion may overlap waste
efforts to improve secondary and tertiary recovery in production and
prevention to focus on another regulatory concern. The work of other
for effective unitization laws in all the producing States bear directly
committees, including the statistical updatings sponsored by the
on improvements in control of underground pressures in a reservoir
Energy Resources Committee, together with the work of the head-
and thus on maximizing ultimate recovery of the known oil in place.
quarters office, is housekeeping in nature or otherwise supportive of
Ironically, a novel series of recent recommendations on a subject never
the substative work of the Commission. It may thus be considered as
before seriously considered by the Compact Commission would seem
within the prescribed relationship to physical waste prevention.
to come squarely within the terms of its charter-the promotion of
The Public Lands Committee stands somewhat apart in its work at
specific measures designed to minimize or avoid physical waste by con-
monitoring legislative and regulatory developments affecting public
sumers of oil and gas, as distinct from producers.
lands. This stems from a concern to ensure that petroleum operations
The same cannot be said, however, for other frequently reiterated
on public lands are subject to the same regulations as those on
pronouncements on various subjects. This would include recommenda-
adiacent private lands. The physical waste rationale is that if reser-
tions dealing with oil import controls, including incentives to expand
voirs along the borders which underlie both public and private lands
domestic refinery capacity; increasing price incentive for natural gas
should be put to uncoordinated development under differing regula-
production; moderating environmental restraints in such diverse areas
tory practices, this could unduly dissipate their underground pres-
as environmental discharge requirements, emission standards, and oil
sures and thus subject them to losses in maximum ultimate recovery.
and gas developments in Alaska and the outer continental shelf; open-
It is obvious that the connection with physical waste prevention is,di-
ing public lands to development and revising leasing policies applica-
rect only for the portion of public lands along their borders. It fails
Hearings, op. cit., p. 53.
16
17
ble to coal, oil shale and tar sands; research and development to de-
We consider that these resolutions can be equated with any organi-
velop other energy sources; and granting priority to the oil and gas
zation's right to petition the Government for action in accord with
drilling industry in Federal allocation of scarce drilling equipment,
the views of the petitioner. Moreover, the Compact Commission could
fuel and tubular goods. As for these, the connecting link with preven-
well consider that the Congress had agreed that expression of these
tion of physical waste of oil and gas is either invisible or long and
views were its right and not proscribed under the terms of its charter.
extremely attenuated. Where there exists any connection at all, it can-
Certainly, similar resolutions commenting on Federal policies and
not be fairly concluded that the subject is directly related to the im-
recommending Federal actions had been promulgated by the Com-
mediate purpose of the Compact as set out in Article II.
mission all during the 1940's, the 1950's and the 1960's. Since 1955,
B. Activities in relation to article V
successive reports of the Attorney General have taken appropriate
note of these Compact Commission actions. Despite all this, the Con-
Our second question for consideration is easier to answer. In ten
gress has continued its periodic consent to extension of the Compact
prior reports since 1955 the Attorney General has been presented with
without ever, before 1971, raising any serious question about the pro-
the question whether the activities of the States under the Compact
priety of these pronouncements.
have been consistent with the purposes set out in Article V of the Com-
As for other aspects of Compact work, prior reports by the Attorney
pact, namely its proscriptions against authorizing the States to limit
General have repeatedly pointed out that the Interstate Oil Compact
production "for the purpose of stabilizing or fixing the price [of oil or
Commission has no power to authorize or to exercise price-fixing
gas], or create or perpetuate monopoly, or to promote regimentation."
authority. It is not so constituted as to be able to engage in the other
Under the present extension of the Compact the question has been
actions proscribed under Section V of its charter. Its only function is
enlarged to include the activities of the Interstate Oil Compact Com-
to undertake studies or research on matters associated with waste pre-
mission as well as those of the States. We do not consider this a
vention, to discuss these matters, and to make recommendations there-
substantial change: Earlier reports have consistently taken the view
on to its member States. Even here, acceptance of these recommenda-
that any continuing activity of the States under the Compact has
tions by the States is entirely voluntary. The States are free to ignore
basically been undertaken through their participation in the work of
them, even as the Federal Government has similarly ignored many
the Commission established by the Compact. Thus, the activities of
Compact Commission resolutions on Federal policies over the years.
the Interstate Oil Compact Commission have always been given
Apart from questions of conformity to the strict mandates of the
appropriate consideration in our prior appraisals.
Compact charter, the IOCC has served a generally useful purpose not
In ten prior reports since 1955 the Attorney General has consist-
elsewhere duplicated. Its technical committees have been of value to
ently answered this question in the affirmative. Activities under the
State regulatory agencies, and perhaps to the industry, in their collec-
Compact have been found to be consistent with the purposes of Article
tion, collation and dissemination of information and data in their
V. They have not been found to be involved in the proscribed conduct
several fields of study. Compact meetings have provided a convenient
set forth therein. From our continuing and detailed surveillance of
forum for exchange of ideas by State regulatory officials in dealing
Compact activities during the period under review, we reiterate that
with mutual conservation problems. As indicated in this report, the
conclusion in this report.
Compact Commission has begun to provide individualized assistance
It must be understood at the outset that the views expressed earlier
to member states in appraising and updating their regulatory effort.
in Section III of this report do not imply that certain Compact Com-
And finally, the Compact Commission serves as a convenient focal
mission activities, found to be not directly related to physical waste
point for the Federal Government to obtain needed information and
prevention, are thereby within the ambit of conduct proscribed by Sec-
statistics on petroleum industry operations from State regulatory
tion V of the Compact. In testimony during House hearings on the
agency files or from State regulatory agency inquiries specifically re-
1972 extension of the Compact, Donald I. Baker, now Deputy Assist-
quested by Federal officials.
ant Attorney General, Antitrust Division, expressed the prevailing
There is, of course, room for argument as to exactly how valuable
view of the Department of Justice concerning Compact activities, with
the work of the Compact Commission is under present conditions. It
particular reference to the promulgation of resolutions which Con-
may be claimed that its period of greatest usefulness is now past, that
gressmen were questioning. He indicated three kinds of situations: the
it is unsuited to present-day concern with the whole spectrum of energy
first, involving activities directly in accord with the heart of the Com-
development, and that its functions could as well be performed in
pact's purpose; the second, dealing with activities directly prohibited,
other forums and by various other agencies. On the other hand, it can
such as controlling prices and other proscribed practices; and the
be argued that even under changed circumstances it still has a unique
third, concerning activities which came within neither category but
role to perform, which cannot be duplicated by any other single agency
fell somewhere in the broad area or between them. In the latter he
or undertaken piecemeal by several other agencies without long delays
included résolution-making efforts "trying to influence the Congress
and losses in efficiency and expertise. All of these may perhaps be
with respect to the decisions of the Congress by offering the views of
legitimate considerations for the Congress in making a determination
the State regulators
54 We continue to adhere to that view.
on extending the Compact. From our individual perspective, however,
and based on our close surveillance of Compact activities in terms
84 Id. at pp. 79-80.
18
of our report responsibilities, we see no occasion to recommend that
Congress withhold it approval to renewal of the Compact.
VIII. CHANGES IN EXISTING Law
In compliance with subsection (4) of Rule XXIX of the Standing
Rules of the Senate, the Committee notes that no changes in existing
law are made by S. J. Res. 126 as reported.
wor
to
m
vd
60 vant to IRA as
R
to THO beend has
S. J. Res. 126
Ainety-fourth Congress of the United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Monday, the nineteenth day of January,
one thousand nine hundred and seventy-six
Joint Resolution
Consenting to an extension and renewal of the interstate compact to conserve
oil and gas.
Resolved by the Senate and House of Representatives of the United
States of America in Congress assembled, That the consent of Con-
gress is hereby given to an extension and renewal from September 1,
1974, to December 31, 1978, of the interstate compact to conserve oil
and gas, as amended, which was signed in its initial form in the city
of Dallas, Texas, the 16th day of February 1935, by the representatives
of Oklahoma, Texas, California, and New Mexico, and at the same
time and place was signed by the representatives, as a recommendation
for approval to the Governors and legislatures of the States of
Arkansas, Colorado, Illinois, Kansas, and Michigan, and which, prior
to August 27, 1935, was presented to and approved by the legislatures
and Governors of the States of New Mexico, Kansas, Oklahoma,
Illinois, Colorado, and Texas, and which SO approved by the six States
last above named was deposited in the Department of State of the
United States, and thereafter was consented to by the Congress in
Public Resolution Numbered 64, Seventy-fourth Congress, approved
August 27, 1935, for a period of two years, and thereafter was extended
by the representatives of the compacting States and consented to by
the Congress for successive periods, without interruption, the last
extension being for the period from September 1, 1971, to September 1,
1974, consented to by Congress by Public Law Numbered 92-322,
Ninety-second Congress, approved June 30, 1972. The agreement to
amend, extend, and renew said compact effective September 1, 1971,
duly executed by representatives of the States of Alabama, Alaska,
Arizona, Arkansas, Colorado, Florida, Illinois, Indiana, Kansas,
Kentucky, Louisiana, Maryland, Michigan, Mississippi, Montana,
Nebraska, Nevada, New Mexico, New York, North Dakota, Ohio,
Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah,
West Virginia, and Wyoming has been deposited in the Department
of State of the United States, and reads as follows:
"AN AGREEMENT TO AMEND, EXTEND AND RENEW THE
INTERSTATE COMPACT TO CONSERVE OIL AND GAS
"WHEREAS, on the 16th day of February, 1935, in the City of
Dallas, Texas, there was executed 'An Interstate Compact to Con-
serve Oil and Gas' which was thereafter formally ratified and
approved by the States of Oklahoma, Texas, New Mexico, Illinois,
Colorado and Kansas, the original of which is now on deposit with
the Department of State of the United States;
"WHEREAS, effective as of September 1, 1971, the several com-
pacting states deem it advisable to amend said compact SO as to
provide that upon the giving of Congressional consent thereto in its
amended form, said Compact will remain in effect until Congress
withdraws such consent;
"WHEREAS, the original of said Compact as so amended will,
upon execution thereof, be deposited promptly with the Department
of State of the United States, a true copy of which follows:
CORRECTED SHEET
S.J. Res. 126-2
"AN INTERSTATE COMPACT TO CONSERVE OIL AND
GAS
"ARTICLE I
"This agreement may become effective within any compacting
state at any time as prescribed by that state, and shall become effective
within those states ratifying it whenever any three of the States of
Texas, Oklahoma, California, Kansas and New Mexico have ratified
and Congress has given its consent. Any oil-producing state may
become a party hereto as hereinafter provided.
"ARTICLE II
"The purpose of this compact is to conserve oil and gas by the
prevention of physical waste thereof from any cause.
"ARTICLE III
"Each state bound hereby agrees that within a reasonable time
it will enact laws, or if the laws have been enacted, then it agrees to
continue the same in force, to accomplish within reasonable limits
the prevention of:
"(a) The operation of any oil well with an inefficient gas-oil
ratio.
" "The drowning with water of any stratum capable of produc-
ing oil or gas, or both oil and gas, in paying quantities.
(c) The avoidable escape into the open air or the wasteful
burning of gas from a natural gas well.
"(d) The creation of unnecessary fire hazards.
"(e) The drilling, equipping, locating, spacing or operating
of a well or wells so as to bring about physical waste of oil or
gas or loss in the ultimate recovery thereof.
" '(f) The inefficient, excessive or improper use of the reservoir
energy in producing any well.
" "The enumeration of the foregoing subjects shall not limit the
scope of the authority of any state.
"ARTICLE IV
"Each state bound hereby agrees that it will, within a reasonable
time, enact statutes, or if such statutes have been enacted then that
it will continue the same in force, providing in effect that oil produced
in violation of its valid oil and/or gas conservation statutes or any
valid rule, order or regulation promulgated thereunder, shall be
denied access to commerce; and providing for stringent penalties for
the waste or either oil or gas.
"ARTICLE V
"It is not the purpose of this compact to authorize the states join-
ing herein to limit the production of oil or gas for the purpose of
stabilizing or fixing the price thereof, or create or perpetuate monop-
oly, or to promote regimentation, but is limited to the purpose of
conserving oil and gas and preventing the avoidable waste thereof
within reasonable limitations.
CORRECTED SHEET
S.J. Res. 126-3
"ARTICLE VI
"Each state joining herein shall appoint one representative to a
commission hereby constituted and designated as THE INTER-
STATE OIL COMPACT COMMISSION, the duty of which said
Commission shall be to make inquiry and ascertain from time to
time such methods, practices, circumstances, and conditions as may
be disclosed for bringing about conservation and the prevention of
physical waste of oil and gas, and at such intervals as said Commis-
sion deems beneficial it shall report its findings and recommendations
to the several states for adoption or rejection.
" "The Commission shall have power to recommend the coordina-
tion of the exercise of the police powers of the several states within
their several jurisdictions to promote the maximum ultimate recovery
from the petroleum reserves of said states, and to recommend meas-
ures for the maximum ultimate recovery of oil and gas. Said Com-
mission shall organize and adopt suitable rules and regulations for
the conduct of its business.
" 'No action shall be taken by the Commission except: (1) By the
affirmative votes of the majority of the whole number of the compact-
ing states represented at any meeting, and (2) by a concurring vote
of a majority in interest of the compacting states at said meet-
ing, such interest to be determined as follows: Such vote of each
state shall be in the decimal proportion fixed by the ratio of its daily
average production during the preceding calendar half-year to the
daily average production of the compacting states during said period.
'ARTICLE VII
" 'No state by joining herein shall become financially obligated
to any other state, nor shall the breach of the terms hereof by any
state subject such state to financial responsibility to the other states
joining herein.
"ARTICLE VIII
" "This compact shall continue in effect until Congress withdraws
its consent. But any state joining herein may, upon sixty (60) days'
notice, withdraw herefrom.
" "The representatives of the signatory states have signed this agree-
ment in a single original which shall be deposited in the archives of
the Department of State of the United States, and a duly certified
copy shall be forwarded to the governor of each of the signatory states.
"This compact shall become effective when ratified and approved as
provided in Article I. Any oil-producing state may become a party
hereto by affixing its signature to a counterpart to be similarly
deposited, certified, and ratified.
" 'Done in the City, of Dallas, Texas, this sixteenth day of
February, 1935.'
"WHEREAS, the said 'Interstate Compact to Conserve Oil and
Gas' in its initial form has heretofore been duly renewed and extended
with the consent of the Congress to September 1, 1971; and
"WHEREAS, it is desired to amend said 'Interstate Compact to
Conserve Oil and Gas' effective September 1, 1971, and to renew and
extend said compact as so amended:
"NOW, THEREFORE, THIS WRITING WITNESSETH:
"It is hereby agreed that effective September 1, 1971, the Compact
entitled 'An Interstate Compact to Conserve Oil and Gas' executed
within the City of Dallas, Tex, on the 16th day of February, 1935,
S. J. Res. 126-4
and now on deposit with the Department of State of the United States,
be and the same is hereby amended by amending the first paragraph
of Article VIII thereof to read as follows:
" This compact shall continue in effect until Congress with-
draws its consent. But any state joining herein may, upon sixty
(60) days' notice, withdraw herefrom.
and that said compact as SO amended be, and the same is hereby
renewed and extended. This agreement shall become effective when
executed, ratified, and approved as provided in Article I of said
compact as SO amended.
"The signatory States have executed this agreement in a single
original which shall be deposited in the archives of the Department
of State of the United States and a duly certified copy thereof shall
be forwarded to the Governor of each of the signatory States. Any
oil-producing state may become a party hereto by executing a counter-
part of this agreement to be similarly deposited, certified, and ratified.
"Executed by the several undersigned states, at their several state
capitols, through their proper officials on the dates as shown, as duly
authorized by statutes and resolutions, subject to the limitations and
qualifications of the acts of the respective State Legislatures.
"THE STATE OF ALABAMA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF ALASKA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF ARIZONA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF ARKANSAS
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF COLORADO
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF FLORIDA
By
Governor
Dated
Attest:
Secretary of State
(SEAL)
S.J. Res. 126-5
"THE STATE OF ILLINOIS
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF INDIANA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF KANSAS
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF KENTUCKY
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF LOUISIANA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF MARYLAND
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF MICHIGAN
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF MISSISSIPPI
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF MONTANA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF NEBRASKA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
S. J. Res. 126-6
"THE STATE OF NEVADA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF NEW MEXICO
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF NEW YORK
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF NORTH DAKOTA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF OHIO
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF OKLAHOMA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE COMMONWEALTH OF PENNSYLVANIA
By
Governor
Dated:
Attest:
Secretary of the Commonwealth
(SEAL)
"THE STATE OF SOUTH DAKOTA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF TENNESSEE
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
CORRECTED SHEET
S.J. Res. 126-7
"THE STATE OF TEXAS
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF UTAH
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF WEST VIRGINIA
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)
"THE STATE OF WYOMING
By
Governor
Dated:
Attest:
Secretary of State
(SEAL)".
SEC. 2. (a) The Attorney General of the United States shall make
a biennial report to Congress, for the duration of the Interstate Com-
pact to Conserve Oil and Gas as to whether or not the activities of the
Interstate Oil Compact Commission and of the States under the provi-
sions of such compact have been consistent with the purposes as set out
in Article V of such compact.
(b) The Attorney General shall also review the activities of any
advisory committees to the Commission and the States, and not later
than June 30, 1978, report to Congress as to whether the activities of
any such advisory committees could tend to create or maintain situa-
tions inconsistent with the antitrust laws of the United States.
SEC. 3. The right to alter, amend, or repeal the provisions of the first
section of this joint resolution is hereby expressly reserved.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.