I think the tax was rightfully named for I remember as a child I visited my grandmother who owned a large apple orchard, and the bad or rotten apples that fell off the trees first were called windfalls.

The results of this tax on the income of the many of we widows who are already retired or nearing retirement and depending on the income. of oil to supplement our social security so that we will not be a burden to our children is bad and rotten.

Mr. BOREN. Thank you very much, Mrs. Garner.

Senator Dole, did you have a comment ?

Senator DOLE. I think that is a very good line. I wish I had thought of that.

Mr. BOREN. We will do our best to see that all the members of the committee read that testimony.

Mr. BOREN. Our next witness is here representing the Royalty Owners Action Committee.

STATEMENT OF JAMES L. STAFFORD, ROYALTY OWNERS

ACTION COMMITTEE

Mr. STAFFORD. I am Jim Stafford from Pontotoc County. We seem to occupy a great position of dominance here today.

Also I was a member of the White House Task Force on Regulatory Reform some years ago so I am not exactly a proponent of excessive regulation and taxation.

But you know back when-on April 2 most of our people-most of our contacts really didn't know what was happening.

The way President Carter signed it into law, this tax is going to make the dust bowl seem tame by comparison.

We feel there are more circling bureaucrats coming down and picking our bones clean. We feel it confiscates our assets, nationalizes our private property, is grossly unconstitutional, will cause economic chaos to the elderly, and dry up capital formation and curtail exploration funding.

Further, it will increase the welfare rolls, force families from their farms and ranches, and demolish the economy of our small rural

towns.

We had no idea that President Carter's plan to free the Nation from OPEC's energy stranglehold included leading 2 million farmers and ranchers to the slaughterhouse.

We were even so trustful of the White House we actually believed that most of the money being collected would finance alternative energy sources rather than be trickled out to promote the latest welfare schemes to satisfy an election-hungry politician and the chronically out of work.

We think the President was ill advised. To most of us it seems like a national conspiracy. Now we realize we were vulnerable. We had no national voice--no organized effort to let our wrath be heard.

We also were guilty of letting some other people try to do our job— the independent producers who lead the oil caravan to Washington. They did a good job for us. I went along to try to tell our story all the way from Tulsa to New York, with a stop of course in Washington, still trying to tell the story.

Well, from this experience of talking to about 200 of the Nation's business and financial writers it became painfully obvious that only a handful of reporters in the Nation had the vaguest idea of the economics of the oil industry.

The idea of royalty ownership is straight out of "Star Wars" to all but a handful.

Our business is complex and it is totally misunderstood by much of the Nation.

You two gentlemen have a hard job in front of you. We are 100 percent behind you.

We would like to comment in the end that we would like these hearings to be taken to some financial centers of the United States. We think that if you held this hearing in New York, Chicago, or Los Angeles that it would take the onus of guilt away from the southwest where they believe everyone is a J. R. Ewing.

Mr. BOREN. Thank you very much and we will include in the record any additional statement that you did not have a chance to present. [The full statement of Mr. Stafford is as follows:]

SENATE FINANCE COMMITTEE TESTIMONY-JAMES L. STAFFORD, ADA, OKLA., ACTING DIRECTOR, ROYALTY OWNERS ACTION COMMITTEE

On April 2, while royalty owners throughout the nation were working on their farms and ranches, President Carter signed into law a tax that will make the Dustbowl seem tame by comparison, to the state of Oklahoma.

Unless we fight back now, we fear the sky will soon be filled with some circling bureaucrats ready to swoop down and pick our bones clean with even more legislation.

Put kindly, the bill confiscates our assets, nationalizes private property, is grossly un-Constitutional, will cause economic chaos to the elderly, dry up capital formation and curtail exploration funding.

Further, it will increase the welfare rolls, force families from their farms and ranches and demolish the economy of our small and rural towns.

It also will ensure a Democratic defeat this November, unless remedied. Few of us back in January had a notion we were about to be sacrificed at a tax rate as high as the major oil companies. Even our best friends in Washington, including many of our elected officials, were reluctant to let us know that President Carter's "plan to free the nation from OPEC's energy stranglehold" included leading 2 million farmers and ranchers to the slaughterhouse.

We were even so trustful of our nation's leadership that we also actually believed most of the money was to be collected from the Exxons of the nation to finance alternative energy sources, rather than be trickled out to promote the latest welfare schemes, to satisfy some election-hungry politicians and the chronically out-of-work.

Too many of us here not familiar with Washington's practical politics, it seemed like a national conspiracy. Now we realize we were vulnerable. We had no national voice, no organized effort to let our wrath be heard.

We also were guilty of letting some other people try to do our job... The independent producers, who lead the oil caravan to Washington. I admit I, too, was sold that they had the royalty owners interests at heart. I was so confident that I volunteered to handle publicity and act as advance man into Washington to ensure that the royalty owners got their fair shake.

As a former public information director for the U.S. Department of Transportation and a Washington and New York public affairs counselor, I felt I could add a dimension to the effort. We worked hard, generated about $3 million in publicity results, and got the independents story told to a hostile press. But it was too little, too late.

And of the 3,000 clippings I've analyzed since then, it is obvious, painfully obvious, that only a handful of reporters in the nation have the vaguest idea of the oil industry. The idea of royalty ownership is straight out of "Star Wars" to all but three of that handful.

So we made a mistake. We let someone else try to do our talking. And they've got their own fish to fry. So now we want to stand up and fight back. And on our own, and with our own facts.

For example, many of us had been receiving little warning notes from the purchasing companies for several months prior to April. Rather than getting ready to fight, most of us simply assumed "big oil" was going to take care of "little oil." I assure this committee, nothing could be further from the truth. One major purchaser said last week that he considered royalty owners to be the biggest pain of his existence. "They write us to defend them, when we've got a totally different set of problems."

Further, Mr. Chairman, we in Oklahoma have always had some pretty tough "mean big brothers" in Washington to help us out. We got lulled into letting them fight our fights. In this case, however, our news about the threat only came from one source an article by Herb Karner of the Tulsa World, who had analyzed some facts and figures that were alarming. I campaigned through the state with this clipping, but I couldn't stir up much indignation. One West Texas oil man told me, "Don't worry, son, this is America. It won't happen."

Today we want to parade forth some facts that point out our feelings. And we want to warn this committee of our other fears.

First, we have a hard time in Oklahoma realizing that "oil" is a dirty word in most of the nation. Thus, it has been tough to realize that while the White House erowed about getting "Big Oil," the majors were getting the best shake possible. Their profits flow unceasingly from overseas.

Secondly, many of us also don't fully realize that to many bureaucrats, the word "profit" is also without honor. To us it means the fulfillment of hard-work, a hope and a dream. You might compare it to getting a GS-18 rating and a new bicycle and briefcase on the same day.

We further think that the administration hoodwinked Congressmen and Senators into believing that they were acting in the national interest, when the White House was orchestrating an election at the royalty owners expense.

We also think passage of the windfall profits tax proves that Congress can and will tax the production of this nation to excess. All they have to do is put a catch name on the tax-like "windfall profits"—and blame somebody unpopular with the voters, like “Big Oil."

Most of the hundreds of royalty owners I've talked to in the past three months believe this to be the biggest tax extortion in history.

I call it the biggest step toward nationalization of assets since Hitler seized control of Germany's industrial organization. And its economic impact will prove devastating, as your statisticians most probably know.

Let's take Pontotoc County as an example. When King Cotton bowed his head and died back in the 1920's folks were packing up for jobs in the bigger cities. when the prolific Beebee field was discovered. Later, when the Depression had county residents heading for the soup lines, the Fitts Field came to our rescue. As a result, Pontotoc County, and Ada, survived. Jobs creation was the principal reason, however, and not because of the handful of millionaires produced by drilling activity. (To set the record straight, for every one of the millionaires, at least 100 wildcatters went broke and have stayed broke). Yet because of the land ownership patterns, about 3,000 or more farmers and ranchers have received royalties over the years. The value received per average recipient, even with the increased price of oil, is still well under $200 per run check according to one bank official. This, plus social security, enables a lot of the county to squeak by, he states. He notes that there are about a hundred professional speculators who have parlayed into some healthy interests that would distort statistical attempts.

Today, however, courtesy of the government, the county faces an immediate loss of $5 million to $8 million in disposable income from royalty owners alone. This amounts to the loss in that county of an industry employing approximately 650 people. In a county of about 36,000 residents, that's severe economic impact. Even worse is what may happen within the next 18 months, according to Tulsa oilman, E. E. Myeroff, who states that 80,000 of our nation's stripper wells may be abandoned. Much of the county's $42 million in production is from mar ginal stripper wells of less than ten barrels daily. The county could be hard hit by abandonment when these wells become too costly to operate. This would batter not only the independent producers and royalty owners but also destroy oilfield service industries that give the county economic stability. Dollar-wise this impact could eventually rob the county of over $32 million yearly.

Veteran Chamber of Commerce executive Ted Savage summed up the impact of the windfall profits tax on Southeastern Oklahoma in these words: "It could prove a hard set-back. Most of our business and cultural institutions have been financed largely by oil interests. Capital for our businesses has largely been advanced by these same interests. It has been oil that has enabled us to achieve steady and desirable growth and the ability to finance new industry and development and to achieve an enviable standard of liveability. It will hit hardest on the elderly and the farmers and ranchers. Most royalty owners here have spent five decades to accumulate and hold on to their interests. Now it would seem that one bill could destroy not only an industry but also an entire economic base."

The profile of a Pontotoc royalty owner seems to follow demographics present in much of the state. About 80 percent of royalty owners are over 60 according to rough estimates by T. E. Kemp, a veteran oilman and attorney. Women predominate, with a large number of widows, based on life-span rates and the development date of most County fields. A majority were believed to be retired. About 50 percent are still living on small farms, ranches and in small farming communities, according to a veteran pumper and gauger. Income in most cases includes social security, royalty income, backed with some seasonal crop receipts, he states.

In letters and interviews received from throughout the state, we can determine a better profile of the impact on the elderly. Here are some comments received in the last two weeks in response to an article in the Oklahoma City Times:

From Tecumseh, Oklahoma, Mrs. Zelta Richardson writes from her hospital bed that she has never before protested a government action, but after working a lifetime to accumulate acreage she is compelled to call this tax unfair, unjust and a disgrace. Mrs. Richardson is in poor health and hospitalized and asked that I read the above statement. Incidentally, this pioneer woman carved out her holdings through her own toil and sweat, with no help or inheritance.

Mrs. Betty Stalcup of Oklahoma City states it is time to wake up and keep anyone out of office who sees fit to write laws to steal. From Duncan, an elderly widow writes that her income is confined to social security, royalty and a small pension. Her royalty check goes to help pay for her medication, which amounts to $25 a month. She enclosed her royalty check for last month. It had been cut from $22 to $18. Next month it'll be more. Gentlemen, this is the big oil you just attacked.

Another elderly widow, a Mrs. Marshall, writes from Oklahoma City that she is totally dependent upon her small royalty income for a living. She endorses totally the Boren-Dole Bill. From Purcell, a gentleman writes that his family royalty income had been pledged to cover investments. He states that the onethird cut in his family income has placed him in a financial bind from which there is no way to recover. He states that politicians seem to be out of touch with reality and suggests that most Senators seem to be too wealthy to relate to the common man. He suggests no more than two terms in office.

A 74-year-old widow, the epitome of the big oil interests Congress attacked. writes that her father was a cattleman who did 18 hours of outside work in patched overalls to hold on to their land near Duncan during the Depression. She personally sold eggs and butter door-to-door before taking a school teaching job in South Dakota, where she also lived in the school to save money, in order to keep the family farm's taxes paid. She's helping put eight grandchildren through school and thinks it unfair that one-third of her income will now go to government, who have some other plans in mind for its distribution, including helping "the chronic non-workers with food stamps."

From Waukomis, Oklahoma, a couple in their 70's write that the tax is "a tragic (sic) unfair deal for the farmers, especially the elderly, who have worked and slaved for years to get a home on the farm and in their last years, when they could be blessed with an oil check to give them help in paying nursing home bills," that the tax seems unfair, "especially with the low prices of wheat."

In Kingfisher, Okla., another retired couple with a small holding joined a Lawton royalty owner in stating that the oil companies can pass on the windfall profits tax, but royalty owners can't. The same sentiment was shared by a Mrs. Prentice of Oklahoma City who also stated that her mother is 93 and in a nursing home. Royalty from her farm in Noble County has helped her mother have adequate medical care. Under the windfall profits tax it is feared that the 3 barrel stripper well will be abandoned, when the operator has to give away two of the three barrels to the government.

A Perry, Oklahoma, "oil baron", Ruth Sitta, says that her royalty in Payne County used to pay her electric bill. Now it doesn't. She asks for all the help she can get to fight back.

Gentlemen, I'll pass along this sampling of letters as evidence that I think you'll find duplicated in states throughout the nation. I also would like to present, as evidence, a series of three articles further describing the plight of our royalty owners by Ms. Mary Jo Nelson, who did extensive research into “little oil."

In closing, myself and several associates have been determined to unite the royalty owners of the nation into a cohesive body in order to obtain the kind of information that provides such committees as we have here today with ammunition. In so doing, we've communicated with royalty owners in Virginia, California, Tennessee, Texas and Kentucky, Kansas, Illinois and many other states.

All share our concern. And more importantly, most are of the firm opinion that our best hope to gain support for such legislation as the Watkins Bill or the Boren-Dole Bill, depends on the need to mobilize royalty owners from outside the oil-producing states.

In studying the patterns of exit migration from our oil states, and from talking with purchasers, integrated oil companies, they exist in surprising numbers. It will be the immediate goal of our organization to try to gain their support.

In closing, we are all grateful that this public hearing was made possible. For a few weeks we were doubtful if we had many friends or even friendly ears in Washington, but now we feel we have a chance, if we'll pull together and fight. It's obvious that there are more pickup trucks outside than there are Cadillacs, so I doubt if we'll be sending around any fancy city lawyers to wine and dine you. We'll attempt to get a lobbyist some day, but we still believe enough in our Constitution and our elected officials to believe that the facts, properly told, delivered to the right leaders, and adequately amplified through the news media of this great nation, can help us win this battle. Gentlemen, our prayers go with you.

Mr. BOREN. Senator Dole.

Mr. DOLE. Well, I think Mr. Stafford made an excellent statement. I do not want to be political here, but I want the record to show that Governor Reagan indicates that he opposes this tax.

We are doing a little work with him on parity. I think we will get him all shaped up here.

Mr. BOREN. I don't know whether we should include those remarks in the record or not.

Our next witness is here representing the Oklahoma Independent Bankers Association.

STATEMENT OF JAMES P. MCKEOWN, OKLAHOMA INDEPENDENT BANKERS ASSOCIATION

Mr. MCKEOWN. Good morning.

My name is James P. McKeown, and I am executive manager of the Independent Bankers Association of Oklahoma.

We are over 200 small and large banks with local ownership servicing primarily the smaller communities.

We take pride in some of the things that may have gone out of style elsewhere like knowing and caring about our customers' business and taking pride in helping them succeed.

Many of our customers are the small farmers and ranchers. In recent years more and more of their income has been diverted to deal with the high cost of doing business with the government.

This and other rising costs of doing business has driven more and more men from their ranches into the city. Many of those that have survived had done so with the help of royalty payments.