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And then the subsection you read comes under that provision.
The CHAIRMAN. Mr. Gavin, we have control of it here in the committee, every phase of it.
Now call the roll
Mr. BECKER. Except the appropriations to operate the plant by the Department of Interior, which is outside of our control here.
(Rollcall.) Mr. SMART. Mr. Chairman, on this vote there are 21 yeas and 1 nay.
The CHAIRMAN. On this rollcall there are 21 votes in the affirmative with 1 in the negative.
A quorum is present. And the bill is recommended to be reported to the House.
I will respectfully request Mr. Price, on behalf of the subcom. mittee, to report the bill.
Now, the next bill is to amendMr. Gavin. Getting back. Before we get on to the other, Mr. Chairman.
You tell us here today, on H.R. 5423, before any action of any kind is taken that it shall come back before this committee for discussion.
The CHAIRMAN. On the sale of anything relating to the oil or the oil shale, it has to be cleared here.
Of course they have to get the money from the appropriations bill if they want to rehabilitate that plant.
Mr. Gavin. Well, I am depending upon you-
Now the Senate bill 2020, to amend title 4 of the subtitle (c) of title 10 of the United States Code, to authorize the Secretary of the Navy to develop the south Barrow gasfield, Naval Petroleum Reserve No. 4, for the purpose of making gas available for sale to the native village of Barrow and for other non-Federal communities and installations, and for other purposes.
S. 2020 The CHAIRMAN. Now this is a small bill, but it is very important to that local community. It has only local applications.
Now, go ahead, Mr. Price.
(1) To authorize the Secretary of the Navy to furnish gas from the South Barrow gasfield, Alaska (Naval Petroleum Reserve No. 4) to all the Federal agencies in the Point Barrow area; and
(2) To permit the Secretary of the Navy to sell gas from the gasfield to the native village of Barrow and other communities
and installations in the Point Barrow, Alaska, area. Since 1950, the Navy itself has been utilizing gas from this field and in 1958 started to supply other Federal agencies in the Point Barrow area despite the absence of specific statutory authorization for this practice. The first purpose of the bill is to grant proper authority for this existing situation.
In order to continue to furnish gas to these Federal installations it is going to be necessary for the Navy to drill a third well. This
well will cost about $400,000. I want to make it clear that the new well is necessary regardless of whether any gas would be sold to the village of Barrow or other communities in the area.
However, since a new well does have to be drilled the Navy can supply all of the gas needed by the Federal installations and by the communities in the area and at the same time amortize the cost of the well through sales to these native communities. The second purpose of the bill is to authorize sales of this kind.
The bill is restricted to this particular area and would have no effect on any of the other petroleum reserves. I know that some members of this committee have been to Point Barrow and are aware what a remote place it is.
Today coal costs the natives $42 a ton, fuel oil costs 60 cents a gallon and propane costs $56 per hundred pounds. To place these costs in an understandable context, I will point out that if the natives were using gas and paying for it at the rate that they are now paying for these other fuels, it would cost them about $3.90 per thousand cubic feet. Here in Washington we pay $1.34 per thousand cubic feet, even though it is piped all the way from Texas.
The Barrow village council is willing to pay $2 per thousand cubic feet, and from the testimony received it would appear that the Navy intends to charge something between $1.34 and $1.72 per thousand cubic feet. At this rate and if generation of heat within the village remained the same, the well would be amortized in 18 years. As a matter of fact, however, it is expected that the householders and other establishments will double the amount of heat now used which would mean that the well would be amortized in half that time, or about 9 years.
The committee took testimony from the Department of the Interior on the subject of the responsibility of the Federal Government to the natives in the area and came to the conclusion that it was a sensible and wholly reasonable proposal that this gas, which is produced virtually in the backyard of the village, should be made available to the native population. It is no giveaway and is a sound business proposition.
I might point out that only 1 square mile of the 35,000 square miles of this reserve is involved in this bill. And I might point out also that there is no oil in this area but only gas--about 10 billion cubic feet of it.
Mr. Chairman, I move favorable consideration of Senate bill 2020.
The CHAIRMAN. Now, members of the committee, the only thing that might disturb some of us is the fact that they are going to have to sink another well in there.
And we are going to have to do that anyhow.
And it is restricted to that local community, and only 1 square mile of the whole reserve is involved.
Mr. BATEs. Now this is part of old petroleum 4, isn't it?
Mr. Bates. And Secretary Anderson about 10 years ago studied this matter and decided we will close operations there.
This is north of the Brooks range.
Mr. KELLEHER. That is right.
Mr. SMART. They had two gas wells then producing. And they have continuously produced from that time to the present time.
They had explored for oil up there. They had found oil in small quantities.
Mr. BATES. That is right.
Mr. SMART. But certainly in no quantities such as to have commercial value, because it had to be moved clear south of the Brooks
range through permafrost, with a parellel heatline to even keep the oil flowing, if we did have it in large quantities.
What we did: We actually shut down the development for petroleum itself, and have made no further exploration in that area since 1955 or 1956.
The two gas wells have continued.
This merely puts another gas well beside the two which have continued to produce gas.
Mr. GAVIN. Now, pardon me
Mr. BATEs. Now we have already sent about $5 million up there, that we had up to 10 years ago.
Mr. SMART. That is correct.
Mr. PRICE. The third well is to meet the additional needs of the military, and would have to be built regardless.
Mr. Bates. That is what I wanted to establish.
pay $2 per foot?
Mr. PRICE. They thought it would be a reasonable cost and would permit a reasonable amortization of the well.
Mr. BATES. Well, I don't know.
The Government may charge the $2 to amortize it over a shorter period of time, or it may make some contract along the line in here, of $1.34.
But all we are doing is giving the authority to make the contract.
you have other Government agencies besides the Navy involved, in this, who use it.
Mr. 'SMART. Air Force.
Mr. BATES. Are those people going to be charged the same as the Eskimos, or what?
Mr. KELLEHER. Everybody will be charged the same amount.
Mr. KELLEHER. The tie-ins will be made at the source.
Mr. KELLEHER. The tie-ins will be made into the source of the gas, the wellhead.
There will not be any Federal responsibility to put in those lines or to operate them. That will be the village itself that does that, the community association.
Mr. Bray. Mr. Chairman
Mr. KELLEHER. It will cost about 50 cents a thousand cubic feet, the wholesale rate, at the source.
Mr. Gavin. And this is going to cost us $400,000, for this one well?
Well, you are going to be a long time in getting your $400,000 back on this basis that you have established.
Mr. PRICE. Leon, the $400,000 charge is there anyway, because our own Government agencies up there require the third well. The well is going to be built anyway.
The CHAIRMAN. 'It is going to be built anyway.
The CHAIRMAN. Well, we stopped the oil, and these two, as Mr. Smart pointed out, are gas wells.
And it is necessary on account of the Federal activity there to have another well. It is going to be built anyhow.
And then we are merely selling it to the local community.
Mr. GAVIN. Then, in other words, the Navy is going into the commercialized oil business when they are selling to the natives
The CHAIRMAN. No
Mr. Gavin. If they are selling to peoples who are not in Government, they are.
If they are selling to individuals-Eskimos and others up therethen they are selling directly to the consumer.
Mr. KELLEHER. That is, of course, right.
So I say that a precedent is being established here that would put the Navy in the oil business or in the gas business.
The CHAIRMAN. Well, it is not a precedent because it is of such location that it cannot be used as a precedent.
It is an isolated section of the country. It is going to be built anyhow there. And we are just doing good business.
Mr. Gavin. Why couldn't
The CHAIRMAN. It is just good business. It will reduce the budget, by collecting a little something.
Mr. HALL. May I see if I can't shed a little more light on this, too? The CHAIRMAN. Yes.
Mr. Hall. Actually, the Navy is not selling directly to the consumer. There is in being, in existence up there now, and the contract will be with, this distributing it could, which is quasi-municipal.
And they are the ones that will tap in at the source and through their existing distributing system
Mr. Gavin. It is a private corporation.
The CHAIRMAN. Not in this bil
Mr. Hardy. Mr. Chairman, I had one or two questions I have been trying to find out about. The CHAIRMAN. Mr. Hardy?
Mr. Hardy. What is the increase in governmental buildup there, in Point Barrow, that makes it necessary to increase the gas capacity of these wells?
Mr. KELLEHER. Actually, Mr. Hardy, it is only partly that.
One of the two wells now, through some physical defect, is producing very little gas.