Buried six feet under good U. S. topsoil lies half of Uncle Sam’s tanker fleet. Never seagoing, this portion of the fleet consists of the Big Inch and the Little Big Inch War Emergency Pipe Lines running from the oil fields of Texas to the seaports of the East Coast. These were the lines that during the war sent more than 367,822,000 barrels of petroleum and petroleum products to the East Coast.
Unlike the cruisers, battleships, and other vessels now swinging at anchor in the Moth Ball Fleet, the fate of the Big and Little Big Inch Lines has not yet been definitely decided. Although both lines have been awarded to the Texas-Eastern Transmission Corporation at a fine round figure of $143,000,000 (only $3,000,000 less than their original costs), the deal still has to be approved by the Federal Power Commission. And this approval, the War Assets Administration estimates, may be as long as two years in coming, if at all.
The lines are now seeing temporary service in the transporting of natural gas into Ohio, an emergency measure authorized during the December, 1946, coal strike. According to agreement, on May 1, 1947 the lines were turned over to their purchaser under an interim lease. This possession, however, may or may not ripen into complete ownership. Since V-J Day the disposition of the lines has been the subject of heated political and economic controversy, and the earlier disputes give promise of continuing until the final decision is made.
DISPOSAL HISTORY
Shortly after V-J Day the lines were turned over to the War Assets Administration for disposal. The War Emergency Pipe Lines, Inc., had operated them during the war as a carrier of crude oil and petroleum products, but with the cessation of hostilities it was deemed best to turn them over to private enterprise.
Disposal of the lines might have seemed a simple problem. But even before title had passed to the War Assets Administration, waves of protest began surging in to engulf the matter in utter confusion. John L. Lewis, spokesman for the United Mine Workers, labelled the lines as “scabs.” Major oil producers tossed in the charge of “trust busting.” Use of the lines for the transportation of natural gas, claimed the railroads, meant utter ruin to their freight trade.
Storm center of the debate was whether or not the lines should be used for the transporting of natural gas or for liquid petroleum products. So far as the transportation of liquid fuels was concerned, only the major oil companies opposed the use of the lines. The Committee of the Independent Company reported to the O’Mahoney Committee no opposition to the use of the lines for transmission of crude or liquid petroleum products.
The Oil Industry, both Major and Independents, desired to revert to prewar competitive conditions as nearly as possible. Opposition to the use for oil stemmed from a transportation near-monopoly controlled by the large oil producers. Owning both oil fields and eastern refineries, the oil companies early went into the field of transportation. At the present time they own 80 per cent of all principal transporting media, including tankers, barges and privately-owned pipe lines.
This near-monopoly gives the large companies a decided advantage over the small, independent producers. Though the tankers and pipe lines are operated as common carriers with the same rates charged to all companies, the profit element of the rates accrues to the companies owning both the oil production facilities and the means for transportation. This means, in effect, that the large companies can undersell the small marketers at the retail outlet.
Cost of shipment from the oil fields to the East Coast has always been high, varying from 32.6 cents per barrel by tanker to $2.47 by freight. In contrast, costs for the operation of the Big Inch line at capacity are 17.1 cents per barrel from East Texas to New York. To interior points the advantage is even greater, with charges to eastern Ohio via the Big Inch at 17.1 cents compared with 51.1 cents by tanker to New York and by pipeline inland. Pipe line costs from Texas to East Coast were estimated at 16.1 cents to 25 cents per barrel versus tanker costs of 15 cents to 21 cents.
The pipe lines, then, if operated as independent common carriers would- give the smaller producers a chance for economic equality with the large producers. The major oil companies would be presented with a difficult dilemma. Either they could continue to operate their tanker fleets at higher costs and hope that the remaining volume of business would be so small as to make operation of the lines impractical, or they could scrap their tanker fleets and purchase the pipe lines. If they chose the latter, it would mean an economic loss so far as their fleet is concerned and would also limit them to a six per cent return on their investment in the lines. Obviously, then, the large companies can best be served by having the lines put to uses other than the transporting of oil.
As to transporting natural gas, the coal industry joined forces with the UMW, the railroads, and the politicians of the Southwest to fight the lines use for that purpose.
The coal industry argued that the importing of natural gas would mean displacing from five to seven million tons of coal each year. The UMW pointed to the consequent loss the miners would suffer if that were to happen. The coke industry stated that thirty per cent of their revenue comes from the sale of artificial gas, a by-product of the production of coke, and that natural gas would wipe out their market.
Claiming that use of the lines for natural gas would cripple railroad facilities, the Association of American Railroads revealed that one-half of all railroad freight tonnage in the East is coal tonnage; that this tonnage constitutes one-third of total freight revenue.
Politicians from Louisiana and Texas opposed the use of the lines for gas on the theory that industry should be induced to come South. Said Senator O’Daniel, “If industry wants to use our cheap gas, let them come to Texas to do it.”
Natural gas, however, was not without its champions. The Department of Interior had long advocated the use of natural gas going to waste in the oil fields. Acid-tongued Harold Ickes, granddaddy of the pipe lines, pointed out that 684 billion cubic feet of natural gas are wasted each year, while coal consumers in the East are forced to pay $20 per ton for fuel. He urged that if the maximum amount of gas were transported through the lines, it would not greatly affect either the coal or railroad industries. Agreeing that five million tons of coal would be displaced annually, he stated that the amount was less than one per cent of total yearly coal production.
Quick to follow the lead of the Department of Interior, the major oil industries revealed that Southwestern oil production is gradually falling off; that the drilling costs for wells at the 10,000 foot level are prohibitive. They argued that the extra revenue gained from the sale of gas would make exploration of new fields feasible. They also pointed out that known gas reserves are sufficient to supply the users of the East for at least two hundred years.
To appease the coke industry, E. Holley Poe, utilities advisor from New York and a proponent of natural gas, suggested that natural gas could be blended with artificial gas. This system, he argued, would provide Eastern industry and home owners with double assurance for an uninterrupted, steady supply of fuel and would not disrupt the economic status of the "coke manufacturers.
This was the conglomerate hue and cry that hit upon the ears of the Real Property Board of the War Assets Administration when they met in November, 1945, to set disposal policies. After extensive hearings, Chairman Robert M. Littlejohn announced that preference would be given to oil.
Bids were called for and sixteen were received, only one of them coming from a major oil industry. Though the lines had originally cost $146,000,000, the top cash bid was only $85,000,000. The Board again went into a huddle, this time for a period of a year. On November 19, 1946, Chairman Littlejohn issued the surprise announcement that all bids had been rejected, and that use of the lines for transporting natural gas would be given equal consideration with that for transporting oil.
While lobbyists stormed at the gates of the WAA and in the halls of Congress, UMW leader John L. Lewis called the now-historic coal strike of December, 1946. This strike provided the impetus for the move which may prove to be the preface of the final chapter in the story of the disposition of the lines. In an emergency effort to offset losses in coal, the government ordered that the lines be temporarily leased to the Tennessee Gas and Transmission Company to bring gas from Louisiana oil fields into the industrial areas of the Midwest.
Scarcely a month after the lease was made, Chairman Littlejohn issued another announcement. He revealed that the WAA had awarded the lines to a new bidder, the Texas-Eastern Transmission Corporation. He added that no restrictions had been placed on the use of the lines, but that the prospective owner intended to use them for transporting natural gas.
To onlookers the really interesting phase of Chairman Littlejohn’s final decision was that he had carefully avoided any personal responsibility as to the future use of the lines. In a very diplomatic manner he announced that his final decision had been based upon considerations of national defense as set out by the Army-Navy Petroleum Board.
DEFENSE FACTORS
The lines were initially built in 1943 and 1944 to send oil to the Eastern theater of war. Prior to and during the time these lines were being laid, German submarines were prowling up and down the Atlantic coast destroying more barges and tankers than could be constructed. The 24-inch line was started in August, 1942, and completed in July, 1943. The 20-inch line was started in April, 1943 and completed in December, 1943, but was not put into operation until March, 1944.
Tankers were at that time the principal carriers in supplying the Eastern seaboard with petroleum. Of the total 1941 volume of 1,500,000 barrels a day, 95 per cent were brought in by tanker, two per cent came in by pipe line, and only three per cent by all other means of transport—rail, barge, and Lake Tankers.
Construction of the lines meant that 544,000 barrels of oil per day could be fed to the East Coast with no risk of loss. It meant that badly needed tankers could be made available to the Atlantic and Pacific theaters. It meant that the pipe lines, in supplanting Fleet and commercial tankers, became an important part of our national defense.
It is obvious that fuel will always be necessary for the prosecution of war. So long as battles are fought with weapons produced by power-demanding industry, so long as mobile weapons are propelled by combustion engines, petroleum and the movement of petroleum products will be required. To insure that fuel will be readily available, the methods of moving such fuel must be protected. This was the problem that confronted Chairman Littlejohn in 1945 and which now confronts the Federal Power Commission. The Big and Little Big Inch lines have to be kept in readiness for military use should another emergency arise.
But what constitutes readiness for military use? This was the question that stumped the experts of the Real Property Board and was thrown by them to the Army-Navy Petroleum Board. The Petroleum Board’s first reply, submitted in 1945, was that the lines had to remain in some use. The Board added that the needs of the Army and Navy would be best served by having the lines continued in use as transporters of liquid petroleum. In reaching this conclusion the Board considered such factors as conversion of the lines from natural gas to oil and the problem of maintaining the pumping stations enroute along the lines. The view of the Petroleum Board was undoubtedly an important reason for Chairman Littlejohn’s early preference for oil.
But were such factors really final? As it was early estimated that reconversion from gas to oil could be made in thirty days, did the demands of military preparedness necessarily exclude the use of the lines for natural gas?
In October of 1946 Admiral F. J. Horne, Chairman of the Army-Navy Petroleum Board, stated to the Real Property Board that the question of ease of reconversion from natural gas to oil was not of enough importance to justify a request for preferential treatment for oil. Instead, Admiral Horne intimated that all that need be considered is the preservation of the lines and their ultimate availability for military use. Acting upon the manifestations of the Petroleum Board, Chairman Littlejohn chose Admiral Horne’s statement as the basis for his November 19 reversal of policy. It was this statement on which the subsequent award of sale was based.
But can the factors of national defense be so summarily dismissed? Just what did Admiral Horne mean when he asked that the lines be preserved so that they would be available for military use? Granting that factors of national defense do not warrant a distinction between use of the lines for natural gas or oil, they do, however, demand that certain conditions be met.
First and most important, whether the lines are leased or sold, whether they are used for gas or for oil, the sales contract carries a stipulation which will permit immediate repossession by the government in time of national emergency, this stipulation to remain in force for twenty years.
Second, the oil pumping facilities and tank farms must be kept in readiness. When oil is piped for many hundreds of miles, the initial pressure from the fields is insufficient to keep it moving. Booster pumps, acting in relays along the way, are required. It is these booster pumps which must be kept in working order.
Similarly, tank farms must be kept in good condition in order that the lines may operate at peak capacity. It is apparent that the oil from the lines cannot be fed directly into the holds of tankers. To avoid shutdowns, the lines must feed directly into storage tanks from which, in turn, final discharge of the fuel can be made. Thus, the tank farms must be maintained.
Third, the lines must be maintained in working condition. This is an important proviso. It means that the government, in leasing or selling the lines, must be assured that they will actually be used. This assurance, in turn, casts a gambler’s burden on the lessee or buyer. Should demand for the products be so low as to warrant shutting down the lines, the owner or lessee would be in a position where he either would have to continue operations at a loss or breach his contract with a consequent forfeiting of possession of the lines.
Should the lines be used for gas, the further problem of conversion arises. Costs of converting the lines, estimated at approximately $20,000,000, could well be wasted if reconversion should be required. Whether or not the use of the lines for gas will prevent their future use for oil is debatable. Some experts allege that the rolled-steel structure of the lines will corrode from the effects of gas, others say that gas will have no effect. Unfortunately, it seems to be a problem which only experience can solve.
WHAT ABOUT THE FUTURE?
Thus you have the situation as it stands today. Though the lines are temporarily in use in the transporting of natural gas, and even though an award has been granted which may make such use permanent, the dispute still rages over the ultimate use of the lines. Congressional committees are still investigating; major interests pro and con are still lobbying. What the result will be rests tucked away in the almanac of the Federal Power Commission.
Though the ultimate sale to the Texas- Eastern Corporation will probably be approved, there is just a slight possibility that the government may decide to operate the lines. But as such an enterprise would demand the express sanction of a Congress already committed to less federal intervention, government control for other than emergency periods is unlikely.
As to the issue of gas versus oil, the economic factors presently seem to weight in favor of the use of the lines for natural gas. The coal strikes served to make this use seem even more desirable.
The really important matter, however, is not whether the lines will be used for gas or for oil or whether the sale to the Texas corporation will be approved. The primary factor of concern to you and to the nation is that the interests of national defense be safeguarded, no matter who gets the lines or what they carry.
And if present indications are any criteria, you can rest assured that Congress, the War Assets Administration, and the Federal Power Commission will see to it that the lines remain in continual readiness for military use.
Mr. Marsden was commissioned in the Supply Corps of the U. S. Naval Reserve in 1941, and transferred to the Regular Navy after two years of active service. He was supply officer on the U.S.S. Doyen in 1944 and 1945, and then served a year in the Public Information Division of the Bureau of Supplies and Accounts before returning to civil life. He is a member of the bar of the District of Columbia.
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SHADES OF COMMODORE FYFE
Contributed by COMMANDER S. H. KINNEY, U. S. Navy
At a reserve fleet berthing area during the demobilization, a Naval Reserve officer in command of a vessel decommissioning had come to the end of his rope. Six months had passed since he had become eligible for separation, yet because he was in command his orders were being held until the job was complete.
In desperation he seated himself at the typewriter (the last radioman and yeoman having been transferred), and addressed the following airmailgram to the type commander.
ALNAV 195 REFERS
SHIPS CO IS FULL OF GRIEF
TIRED OF WAITING FOR RELIEF
PURSUANT ALNAV 252
HIS RELEASE IS OVERDUE
UNDER PAR. ONE SEVEN A
EXCUSE IS GONE FOR MORE DELAY
NINETY DAYS WERE WHOLLY PAST
ON NOVEMBER ONE THREE LAST
IF ALNAVS MEAN JUST WHAT THEY SAY
SEND HIS RELIEF RIGHT NOW TODAY
EXEC CAN DO A JOB OF BEAUTY
TO PLACE SHIP IN INACTIVE DUTY
Several days passed without a reply. The officer began to doubt the wisdom of sending such a message to the command that held his discharge button. About the time he decided that a serious error had been made, a speedletter from the type commander arrived. With visions of Portsmouth before him he took the message from the communication officer.
YOUR PLIGHT IS SAD, YOUR CASE IS BAD
ITS SHAME INDEED THAT YOU’VE BEEN HAD
IF YOUR ARREARS IS CAUSE FOR FEARS
JUST BLOW YOUR NOSE AND DRY YOUR TEARS
YOUR SORROW NOW WILL FIND SURCEASE
WHEN BUPERS ORDERS YOUR RELEASE
2 DOUBLE O NINE THREE O REFERS
IF BUPERS OFFERS NO DEMURS
The reference dispatch, 20093, informed BuPers that the officer was available for immediate transfer to a separation center.
{The Proceedings will pay $5.00 for each anecdote submitted to and printed in, the Proceedings).