facture of gasoline on the one hand and the requirements of the Nation for crude oil and gasoline on the other. This was the purpose of the production and refining provisions of the code. The theory of these provisions of the code, particularly the production provisions, and the amendments to the refinery provisions of April 24, 1934, was the balancing of supply with demand in the interest of conservation and of stability within the industry. As a necessary concomitant were the provisions of the code designed to regulate the development of new fields through the approval of plans designed to permit greatest ultimate recovery and economical and scientific development.

Under the production provisions of the code the estimates of required production were prepared currently by the Bureau of Mines and the Petroleum Administrative Board upon the basis of statistical data received and tabulated by the Bureau of Mines and were recommended to the Petroleum Administrator by the Petroleum Administrative Board. They were certified by the Petroleum Administrator to the regulatory commissions of States having such agencies, to industrial proration committees in States without regulatory commissions, and to the Governors of oil producing States which were without either regulatory commissions or industrial proration committees. The method employed in making the estimates was based primarily upon calculation of gasoline production necessary to meet the demand therefor, with additions to or subtractions from storage, and the quantity of crude oil necessary to manufacture the required gasoline, together with such crude oil as was required for export and use directly in the field for fuel purposes. Allowances also were made for crude-oil imports and withdrawals from or additions to crude oil storage.

During the fiscal year the production of crude petroleum in the United States exceeded by slightly less than 4 percent the amount determined by the Federal agency to be sufficient to provide for consumer demand for petroleum products after due account had been taken for probable withdrawals from storage and of anticipated imports. Production in excess of the allowables was less during the latter portion of the fiscal year than in the earlier months, as shown by the table accompanying the complete report of which this is a

summary.

The balancing of crude-oil production with consumer demand for petroleum products as provided for in the code did not necessitate the restriction of output during the past fiscal year below that of the preceding year. One of the objectives of the industry in connection with crude-oil production has been to establish as nearly a uniform rate of production throughout the year as possible, as

such uniformity leads to efficiency in operation, stability of employment, and assists the State regulatory commissions and others in the control of production from the various wells and fields within a State. During the calendar year 1933 crude-oil production varied from 2,102,000 barrels in January to 2,813,000 in June, or a range of 711,000 barrels between the lowest and highest daily rates of production. During the calendar year 1934 crude-oil production ranged from a low of 2,323,000 barrels in January to a high of 2,655,000 barrels in June, or a difference of 332,000 barrels between the lowest and highest daily rates of production. This range was identical with that recorded during the 1935 fiscal year when crude-oil production ranged from a low of 2,413,000 barrels daily in November and December 1934 to a high of 2,745,000 barrels daily during June 1935. This comparison indicates a definite tendency toward the attainment of the industry's objective of as nearly a uniform monthly rate of production as possible.

During the period of operations under the Petroleum Code, the smaller oil producing States produced a larger share of the national crude-oil output than they did immediately prior to the period of the Petroleum Code. This change did not result through transfer by the Federal agency (Department of the Interior) of production allowables from one State to another, but undoubtedly came about through the coordination of Federal and State activity whereby there was eliminated the localized excess production which characterized the petroleum industry immediately prior to the period of the code.

According to section 1, article III, of the Petroleum Codę, imports of crude petroleum and petroleum products for domestic consumption were to be limited to volumes bearing such ratio to the estimated volume of domestic production as would effectuate the purposes of the Petroleum Code and the National Industrial Recovery Act. In the Administrator's order of September 2, 1933, such imports were directed to be limited to an amount not exceeding the average daily imports of petroleum and petroleum products during the last 6 months of 1932. During that semester total imports of crude and refined products averaged 108,000 barrels daily, of which 10,000 barrels daily were bonded imports and 98,000 barrels were imports for domestic consumption. During the 1935 fiscal year total receipts of crude petroleum and refined products from foreign countries aggregated 52,354,000 barrels, or a daily average of 143,435 barrels. Receipts for domestic consumption totaled 34,578,000 barrels, a daily average of 94,734 barrels, or somewhat under the daily average of 98,000 barrels of imports for domestic consumption during the last 6 months of 1932. Imports in bond, consisted of

supplies for vessels and oil imported for refining and export, amounted to 17,776,000 barrels, or a daily average of 48,701 barrels. Experience under the Petroleum Code demonstrated that the balancing of crude oil supply with the consumer demand for petroleum products necessitated the control of withdrawals of crude oil from storage as well as the regulation of current production and imports. The general objective of the administration was to permit at all times such withdrawals of crude oil from storage as were necessary to prevent discrimination against refining plants which did not have an ample supply from sources of current production; to permit, during periods of high seasonal demand, such withdrawals as were consistent with the reduction of inventories toward economic levels without unreasonable limitation of current production; and, during periods of low seasonal demand, to avoid net withdrawals so that the crude oil required for refining and exporting would be supplied from current production. It was felt that such procedure aided the State authorities and industry committees in the enforcement of production orders, contributed to the prevention of physical waste by lowering the amount of oil held above ground in storage, and avoided discrimination between operators.

In line with this procedure, crude-oil inventories were reduced during the period of high seasonal demand from 357,239,000 barrels on June 30, 1934, to 337,085,000 barrels on December 31, 1934. The continuation of a high rate of demand during December 1934 and the demonstrated necessity to increase gasoline inventories brought about such a high level of refining operations, with concurrent large withdrawals from crude-oil storage, that production allowables were raised during the month to conform with the increased demand for crude oil. Beginning with a revised inventory figure of 337,254,000 barrels on January 1, 1935, the amount of crude oil in storage was not reduced further during the period of low seasonal demand, but increased to 338,559,000 on May 31, 1935. During June 1935, with the beginning of the period of high seasonal demand and with the code invalidated, crude-oil inventories were reduced 3,802,000 barrels, to a level of 334,757,000 barrels on June 30, 1935.

The provision in the Petroleum Code whereby no petroleum produced from a newly discovered source of crude petroleum could be shipped in or affecting interstate commerce unless a plan for the development of the new pool had been approved by the Administrator is regarded quite generally as a particular accomplishment under the Petroleum Code leading to the conservation of petroleum resources and the prevention of waste. Regulations designed to provide for the submission of plans for the systematic and orderly development of new pools were approved by the Administrator on December 23,

1933. Each new plan as submitted by operators in the new pool was reviewed by the technical staff of the Petroleum Administrative Board and the United States Geological Survey before submission to the Administrator. Where divided views existed concerning the provisions contained in the plan as submitted, hearings either in Washington or in the field were held concerning the merits of respective development programs.

During the fiscal year ended June 30, 1935, the Petroleum Administrator approved 122 plans for the orderly development of new oil pools.

The refining article of the Petroleum Code provided for a joint governmental and industrial organization in which the Federal agency determined the total production of gasoline necessary to meet the current demand therefor and the proper total inventories of gasoline, and the planning and coordination committee divided the national total of production and inventory changes into district totals, and district allocators or allocating agencies divided the totals among plants within the district. Provision also was made for the hearing of appeals from plant and district allocations, with the result that the original determinations were in several instances amended as the needs for additional gasoline production became evident. Gasoline production in the United States exceeded the total determined as necessary by but approximately 1 percent, as shown by table accompanying the full report.

During the fiscal year ended June 30, 1935, the accounting division was engaged with various and sundry investigations ordered by the Administrator or requested by members of the Board, all of which had a direct bearing upon code enforcement. A résumé of its activities is as follows:

Preliminary figures on the study of the economic cost of recovery of crude petroleum ordered by the Administrator on December 20, 1933, were released September 19, 1934. The survey covered 3 calendar years, 1931, 1932, and 1933. One thousand and nine schedules covering cost data on 1,133 companies were included in the tabulations. A substantial percentage of the total production-75.72 for 1931, 76.71 for 1932, and 72.22 for 1933-uniformly spread over the various producing areas was covered.

The average per-barrel cost for the country as a whole, including interest on invested capital, was found to have been as follows: 1931, $0.894; 1932, $0.808; and 1933, $0.717. In order that the effect of the code upon costs might be ascertained, the year 1933 was segregated into two periods. The first was from January 1 to September 30, which included but 1 month (September) of code enforcement, and the second from October 1 to December 31, during which time the code was in full effect. For the former period costs

for the country as a whole declined to the lowest on record to $0.669 per barrel, rising during the latter period to $0.772 per barrel. Costs were also shown by States and for the more important pools and fields within the States. In addition to the financial and investment data, information was gathered also on wells, proven acreage, and potential reserves.

A continuation of this study to cover the year 1934 was ordered by the Administrator on December 14, 1934. At the close of the fiscal year considerable progress had been made in completing that study. In all 891 schedules covering the operation of 1,021 companies and 55.5 percent of the 1934 production had reported. These schedules have been carefully analyzed, audited, and tabulated. The issuance of the results of this study await the outcome of a recent request made upon the larger companies, furnishing information for the previous study who by reason of the invalidation of the code have not reported, to submit their schedules for the 1934 period. Through the summer and fall of 1934 there was a gradual increase in the amount of overproduction of crude oil, particularly in east Texas, where the State enforcement proved unequal to the task of obtaining compliance with State allocations which were within. the Federal allocations. The pressure of this overproduction on the market very nearly brought on the collapse of the price structure of crude and of the efforts to balance supply with demand.

The decision of the Circuit Court of Appeals for the Fifth District in the Panama and Amazon cases reversing the lower court and upholding the power of the Federal Government to require reports in the enforcement of section 9 (c) of the National Industrial Recovery Act, and upholding the validity of the section itself, permitted the reestablishment of Federal enforcement in east Texas. In July 1934 and again in August regulations requiring reports and affidavits were revised. However, by filing fraudulent affidavits of the legality of oil shipped and by failing to make reports, hot-oil producers continued to operate in violation of the law and a new means of enforcement of the section was sought resulting in October of 1934 in the creation of the Federal Tender Board under the authority of section 9 (c) and the authority to make rules and regulations to carry out the provisions of the section. In lieu of the affidavits of legality required with shipments, certificates of clearance, issued by the Federal Tender Board, were required as a condition precedent to the movement of petroleum and petroleum products in interstate commerce out of east Texas. Conditions had become so serious that prices had begun to break the day the Tender Board was created. The immediately successful operations of this Board stemmed the flow of hot oil into interstate commerce and averted a collapse.