D ILLINOIS UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN PRODUCTION NOTE University of Illinois at Urbana-Champaign Library Brittle Books Project, 2017.COPYRIGHT NOTIFICATION In Public Domain. Published 1923-1977 in the U.S. without printed copyright notice. This digital copy was made from the printed version held by the University of Illinois at Urbana-Champaign. It was made in compliance with copyright law. Prepared for the Brittle Books Project, Main Library, University of Illinois at Urbana-Champaign by Northern Micrographics Brookhaven Bindery La Crosse, Wisconsin 2017" • ;• ' r-\; "- j>\ mm* .. > . , . - .. ..<€■ ^ .......,,,,... - •" ■ _ '. i - .- V4.P96/1 Oi 5/4x '?. XM-Wfi '' v a .' 'V i' v. . • • • fSfljp ••--■' .-;.■ ...... ' ' --■■■• , . ■ -■■■ . ' • ;;-*V V ■•'... v , ,. ■ :> ^ vi-l??.!'' ■"■ > v» . . .> .-,. - .- . .... .. '- :■ : " •• : .-■y»':.-£-W->'h ',-^v. v.,;■ £ ■■ - : ' «V„ .v U-VvS ' -a '?:- i-rfci- X- : ';v'":^V-';'v-..;, ,■■ ;:;V W ■■ ;: v£^;>V^ ' - "■ ■:* *: u-V : ^:V. ■: .,." ■/■ I:---. : •.. :i0mg;: ;;•■?';.kV«. - ^  ' ■ ^ -:. ...; . W;-. : '..[COMMITTEE PRINT] DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN REPORTS SUBMITTED TO THE COMMITTEE ON PUBLIC LANDS AND SURVEYS UNITED STATES SENATE SEVENTY-NINTH CONGRESS SECOND SESSION ON S. 1236 A BILL TO PROMOTE THE DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DQMAIN AND ON LANDS AC- QUIRED FOR THE APPALACHIAN NATIONAL FOREST, AND FOR OTHER PURPOSES BY THE DEPARTMENT OF THE INTERIOR AND THE DEPARTMENT OF AGRICULTURE Printed for the use of the Committee on Public Lands and Surveys UNITED STATES GOVERNMENT PRINTING OFFICE 84034 WASHINGTON : 1946COMMITTEE ON PUBLIC LANDS AND SURVEYS CARL A. HATCH, New Mexico, Chairman ROBERT F. WAGNER, New York CHAN GURNEY, South Dakota JOSEPH C. O'MAHONEY, Wyoming RAYMOND E. WILLIS, Indiana JAMES E. MURRAY, Montana EDWARD V. ROBERTSON, Wyoming PAT McCARRAN, Nevada GUY CORDON, Oregon CHARLES O. ANDREWS, Florida BOURKE B. HICKENLOOPER, Iowa ABE MURDOCK, Utah WILLIAM A. STANFILL, Kentucky EDWIN C. JOHNSON, Colorado GLEN H. TAYLOR, Idaho Stewart A. Hatch, Clerk N. D. McSherry, Assistant Clerk IICONTENTS Page S. 1236___________________________________________________________ 1 Interior Department report on S. 1236__________________________/_____ 8 Agriculture Department report on S. 1236____________________________ 25 niDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN S. 1236, SEVENTY-NINTH CONGRESS, FIRST SESSION A BILL To promote the development of oil and gas on the public domain and on lands acquired for the Appalachian National Forest, and for other purposes Be it enacted by the Senate and House oj Representatives of the United States oj America in Congress assembled, That section 1 of the Act approved February 25, 1920 (41 Stat. 437; U. S. C., title 30, sec. 181), as amended, is amended by striking out the words "lands acquired under the Act known as the Appalachian Forest Act, approved March 1, 1911, and". Sec. 2. Sections 17, 27, 30, and 36, respectively, of the Act approved February 25, 1920 (41 Stat. 437; U. S. C., title 30, sees. 226, 184, 187, and 192), as amended, are amended to read as follows: "Sec. 17. All lands subject to disposition under this Act which are known or believed to contain oil or gas deposits may be leased by the Secretary of the Interior. When the lands to be leased are within any known geological structure of a producing oil or gas field, they shall be leased to the highest responsible qualified bidder by com- petitive bidding under general regulations, in units of not exceeding six hundred and forty acres, which shall be as nearly compact in form as possible, and any lease so obtained shall be excepted in determining holdings or control under the acreage limitation provisions of any section of this Act. Such leases shall be for a period of ten years and so long thereafter as oil or gas is produced in paying quantities and shall be conditioned upon the payment by the lessee of such bonus as may be accepted and of such royalty as may be fixed in the lease, which shall be not less than 12% per centum in amount or value of the pro- duction. When the lands to be leased are not within any known geological structure of a producing oil or gas field, the person first making application for the lease who is qualified to hold a lease under this Act shall be entitled to a preference right over others to a lease of such lands without competitive bidding. Such leases shall be for a period of five years and so long thereafter as oil or gas is produced in paying quantities and shall be conditioned upon the payment by the lessee of a royalty, in the case of oil, of 12% per centum in amount or value of the production when the said production does not exceed v fifty barrels per well per day for the calendar month and of not less J-than 12% per centum in amount or value of the production when the Ni said production exceeds fifty barrels per well per day for the calendar ^ month, and, in the case of gas, of 12% per centum in amount or value 4 of the production when the said production does not exceed five ^million cubic feet per well per day for the.calendar month and, when ^ the said production exceeds five million cubic feet per well per day for ^the calendar month, of not less than 12% per centum in amount or Rvalue of the production: Provided, That upon the expiration of the 12 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN initial five-year period of any such lease maintained in accordance with the applicable statutory requirements and regulations, the record title holder thereof shall be entitled to a preference right over others to a renewal of such lease for the same land for an additional period of five years and so long thereafter as oil or gas is produced in paying quantities, if application for such renewal shall be filed within 90 days prior to the date of expiration of the initial five-year period of such lease: Provided further, That such preference right shall not apply to lands which are within any known geological structure of a producing 011 or gas field on the date of the filing of such application: And pro- vided further, That only one such renewal may be granted. Any such lease which is not subject to renewal and upon which drilling operations are being conducted at the expiration of the term thereof shall con- tinue in force and effect for a period of two years and so long thereafter as oil or gas is produced in paying quantities. "All leases issued under this section shall be conditioned upon the payment by the lessee in advance of a rental of not less than 25 cents per acre per annum or fraction thereof prior to discovery and of a minimum royalty of $1 per acre payable at the expiration of each period of twelve full calendar months after discovery: Provided, That in case of lands not within any known geological structure of a pro- ducing oil or gas field the retitals for the second and third lease years shall be waived, unless a valuable deposit of oil or gas be sooner discovered: Provided further, That in the event the Secretary of the Interior shall direct or shall assent to the suspension of operations or of production of oil or gas under any such lease, any payment of acreage rental, or of minimum royalty, as herein provided shall likewise be suspended during such period of suspension of operations or produc- tion, and such lease shall continue in effect after the expiration of the original term thereof for a period equal to such period of suspension and so long thereafter as oil or gas is produced in paying quantities: And provided further3 That in the case of leases valuable only for the production of gas the Secretary of the Interior upon showing by the lessee that the lease cannot be successfully operated upon such rental, or minimum royalty, or upon the royalty, provided in the lease, may waive, suspend, or reduce such rental or minimum royalty, or reduce such royalty. Upon the determination by the Secretary of the Interior that a new oil or gas field or deposit has been discovered after May 27, 1941, (a) by a well drilled within the boundaries of any lease requiring payment of royalty in excess of 12% per centum, or (b) by a well drilled within two miles of the boundaries of any such lease, the cost of which shall have been contributed to by any lessee of the United States holding any such lease, or would have been contributed to by any such lessee of the United States had the well been nonpro- ductive, the royalty obligation to the United States of the lessee who drilled such well, or who contributed or would have contributed to such well, shall be reduced, as to such new oil or gas field or deposit, to 12 % per centum in amount or value of the production for said leased lands if the well was drilled thereon, or for that portion of the leased lands determined by the Secretary of the Interior to be equitably entitled thereto by virtue of such contribution or agreement to contribute. "The Secretary of the Interior, for the purpose of more properly conserving the oil or gas resources of any area, field, or pool, mayDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 3 require that leases hereafter issued under any section of this Act be conditioned upon an agreement by the lessee to operate, under such reasonable cooperative or unit plan for the development and operation of any such area, field, or pool, as said Secretary may determine to be practicable and necessary or advisable, which plan shall adequately protect the rights of all parties in interest, including the United States: Provided, That all leases operated under such plan approved or prescribed by said Secretary shall be excepted in determining hold- ings or control under the provisions of any section of this Act. "Leases issued for a term of twenty years pursuant to this Act shall continue in force and effect in accordance with the terms of such leases and the laws under which issued: Provided, That any such lease that has become the subject of a cooperative or unit plan of development or operation, or other plan for the conservation of the oil and gas of a single area, field, or pool, which plan has the approval of the Secretary of the department or departments having jurisdiction over the Govern- ment lands included in said pl&n as necessary or convenient in the public interest, shall continue in force beyond said period of twenty years until the termination of such plan: And provided further, That said Secretary or Secretaries shall report all leases so continued to Congress at the beginning of its next regular session after the date of such continuance. "Any cooperative or unit plan of development and operation, which includes lands owned by the United States, may, in the discretion of the Secretary of the department or departments having jurisdiction over such lands, contain a provision whereby authority is vested in such person, committee, or State or Federal officer or agency as may be designated in the plan to alter or modify from time to time the rate of prospecting and development and the quantity and rate of produc- tion under said plan. The Secretary of the Interior is authorized whenever he shall deem such action necessary or in the public interest, with the consent of lessee, by order to suspend or modify the drilling or producing requirements of any oil and gas lease not subject to such a cooperative or unit plan, and no lease shall be deemed to expire by reason of the suspension of production pursuant to any such order. "Whenever it appears to the Secretary of the Interior that wells drilled upon lands not owned by the United States are draining oil or gas from lands or deposits owned in whole or in part by the United States, including lands or deposits made subject to the jurisdiction of the Secretary of the Interior by Executive order, the Secretary of the Interior is hereby authorized and empowered to negotiate agreements whereby the United States or the United States and its permittees, lessees, or grantees shall be compensated for such drainage, such agreements to be made with the consent of the permittees and lessees affected thereby, and the payment of compensatory royalty under any such agreement shall continue in effect the term of any lease for which compensatory royalty is being paid for a period equal to the period during which such compensatory royalty is paid. "Whenever the average daily production of the oil wells on an entire leasehold or on any tract or portion thereof aggregated for royalty purposes shall not exceed ten barrels per well per day, or where the cost of production of. oil or gas is such as to render further production economically impracticable. the Secretary of the Interior, for the purpose of encouraging the greatest ultimate recovery of oil and in the4 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN interest of conservation of natural resources, is authorized to reduce the royalty on future production when in his judgment the wells cannot be successfully operated upon the royalty fixed in the lease. The provision of this paragraph shall apply to all oil and gas leases issued under this Act, including those within an approved cooperative or unit plan of development and operation. "Any lease issued after August 21, 1935, under the provisions of this section, except those earned as a preference right as provided in sec- tion 14 hereof, shall be subject to cancellation by the Secretary of the Interior after thirty days' notice upon the failure of the lessee to comply with any of the provisions of the lease, unless or until the land covered by any such lease is known to contain valuable deposits of oil or gas. Such notice in advance of cancellation shall be sent the lease owner by registered letter directed to the lease owner's record post-office address, and in case such letter shall be returned as unde- livered, such notice shall also be posted for a period of thirty days in the United States Land Office for tha district in which the land cov- ered by such lease is situated, or in the event that there is no district land office for such leased land, then in the post office nearest such land. Leases covering lands known to contain valuable deposits of oil or gas shall be canceled only in the manner provided in section 31 of this Act. "Sec. 27. No person, association, or corporation, except as herein provided, shall take or hold coal, phosphate, or sodium leases or permits during the life of such leases or permits in any one State exceeding in aggregate acreage two thousand five hundred and sixty acres for each of said minerals; no person, association, or corporation shall take or hold at one time oil or gas leases or permits exceeding in the aggregate fifteen thousand three hundred and sixty acres granted hereunder in any one State; and no person, association, or corporation shall take or hold at one time any interest or interests as a member of an association or associations or as a stockholder of a corporation or corporations holding a lease or leases, permit or permits, under the provisions hereof, which, together with the area embraced in any direct holding of a lease or leases, permit or permits, under this Act, or which, together with any other interest or interests as a member of an association or associations or as a stockholder of a corporation or corporations holding a lease or leases, permit or permits, under the provisions hereof for any kind of mineral leases hereunder, exceeds in the aggregate an amount equivalent to the maximum number of acres of the respective kinds of minerals allowed to any one lessee or permitted under this Act. The interest of an optionee under an option to purchase or otherwise acquire one or more oil or gas leases, or any interest therein, when coupled with the express obligation to conduct geophysical examination of the leased land, shall not, prior to the exercise of such option, be a taking or holding under the acreage limitation provisions of any section of this Act: Provided, That no such option shall be entered into after June 1, 1945, for a period of more than two years in the aggregate without the prior approval of the Secretary of the Interior: Provided further, That no person, association, or corporation shall hold at one time such options of more than one hundred thousand acres in any one State. Any interests held in violation of this Act shall be forfeited to the United States by appro- priate proceedings instituted by the Attorney General for that purposeDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 5 in the United States district court for the district in which the property, or some part thereof, is located, except that any ownership or interest forbidden in this Act which may be acquired by descent, will, judg- ment, or decree may be held for two years and not longer after its acquisition: Provided further, That nothing herein contained shall be construed to limit sections 18, 18a, 19, and 22 or to prevent any number of lessees under the provisions of this Act from combining their several interests so far as may be necessary for the purposes of constructing and carrying on the business of a refinery, or of establish- ing and constructing as a common carrier a pipe line or lines of railroads to be operated and used by them jointly in the transportation of oil from their several wells, or from the wells of other lessees under this Act, or the transportation of coal or to increase the acreage which may be acquired or held under section 17 of this Act: Provided further, That any combination for such purpose or purposes shall be subject to the approval of the Secretary of the Interior on application to him for permission to form the same: Provided further, That for the pur- pose of more properly conserving the natural resources of any single oil or gas pool or field, or area, or any part thereof, permittees and lessees thereof and their representatives may unite with each other or jointly or separately with others in collectively adopting and operating under a cooperative or unit plan of development or operation of said pool or field or area, or any part thereof, or of any well site or sites therein, whenever determined and certified by the Secretary of the Interior to be necessary or advisable in the public interest, and the Secretary of the Interior is thereunto authorized in his discretion, with the consent of the holders of leases or permits involved, to establish, alter, change, or revoke drilling, producing, and royalty requirements of such leases or permits, and to make such regulations with reference to such leases and permits with like consent on the part of the lessee or lessees and permittees in connection with the institution and oper- ation of any such cooperative or unit plan as he may deem necessary or proper to secure the proper protection of such public interest: Provided further, That any lease which shall be eliminated from any such approved agreement or plan shall continue in effect for the original term thereof but for not less than two years, and so long there- after as oil or gas is produced in paying quantities: Provided f urther, That the Secretary of the Interior is hereby authorized, on such condi- tions as he may prescribe, to approve operating, drilling, or develop- ment contracts made by one or more lessees in oil or gas leases, with one or more persons, associations, or corporations, whenever in his discretion and regardless of acreage limitations, provided for in this Act, the conservation of natural products or the public convenience or necessity may require it or the interests of the United States may be best subserved thereby: Provided further, That except as herein provided, if any of the lands or deposits leased under the provisions of this Act shall be subleased, trusteed, possessed, or controlled by any device permanently, temporarily, directly, indirectly, tacitly, or in any manner whatsoever, so that they form a part of or are in anywise controlled by any combination in the form of an unlawful trust, with the consent of the lessee, or form the subject of any contract or con- spiracy in restraint of trade in the mining or selling of coal, phosphate, oil, oil shale, gas, or sodium entered into by the lessee, or any agree- ment or understanding, written, verbal, or otherwise, to which such 84034—46-26 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN lessee shall be a party, of which his or its output is to be or become the subject, to control the price or prices thereof or of any holding of such lands by any individual, partnership, association, corporation, or control in excess of the amounts of lands provided in this Act, the lease thereof shall be forfeited by appropriate court proceedings: And provided further, That nothing in this Act shall be construed as affect- ing existing leases within the borders of the naval petroleum reserves or agreements concerning operations thereunder or in relation to the same, but the Secretary of the Navy is hereby authorized, with the concent of the President, to enter into agreements such as those pro- vided for herein, which agreements shall not, unless expressed herein, operate to extend the term of any lease affected thereby. "Sec. 30. Subject to final approval by the Secretary, any lease issued under the authority of this Act may be assigned or subleased, in whole or in part, and any assignment or sublease when so approved shall take effect as of the date of filing in the proper land office of two original executed counterparts thereof together with any required bond and proof of the qualification under this Act of the assignee or sublessee to take or hold such lease. Until so approved, the assignor or sublessor and his surety, however, shall continue to be liable for the breach of any and all obligations as if no assignment or sublease had been executed; and, in the event that the Secretary for cause refuses to approve the assignment or sublease, the lessee and his surety shall remain liable for the continued performance of all of the terms and conditions of the lease. Any partial assignment of any lease shall segregate the assigned and retained portions, thereof and ^to the same extent as in the last preceding sentence provided, release and dis- charge the assignor from all obligations thereafter accruing with respect to the assigned lands; and such segregated leases shall continue in full force and effect for the terms of the original lease but for not less than two years after the date of discovery of oil or gas in paying quan- tities upon any other segregated portion of the lands originally subject to such lease. The lessee under any lease issued under the authority of this Act may at any time make written relinquishment of all rights under such lease or of any legal subdivision of the area included within the lease upon payment of all accrued rentals and royalties and upon placing all wells on the lands to be relinquished in condition for sus- pension or abandonment and thereupon the lessee shall be released of all obligations thereafter accruing under said lease with respect to the lands relinquished, but no such relinquishment shall release the lessee, or the lessee's bond, from any liability for breach of any obliga- tion of the lease, other than a drilling obligation, accrued at the date of the relinquishment. Each lease shall contain provisions for the purpose of insuring the exercise of reasonable diligence, skill, and care in the operation of said property; a provision that such rules for the safety and welfare of the miners and for the prevention of undue waste as may be prescribed by said Secretary shall be observed, including a restriction of the workday to not exceeding eight hours in any one day for underground workers except in cases of emergency; provisions prohibiting the employment of any boy under the age of sixteen or the employment of any girl or woman, without regard to age, in any mine below the surface; provisions securing the workmen complete freedom of purchase; provision requiring the payment of wages at least twice a month in lawful money of the United States, andDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 7 providing proper rules and regulations to insure the fair and just weighing or measurement of the coal mined by each miner, and such other provisions as he may deem necessary to insure the sale of the production of such leased lands to the United States and to the public at reasonable prices, for the protection of the interests of the United States, for the prevention of monopoly, and for the safeguarding of the public welfare: Provided, That none of such provisions shall be in conflict with the laws of the State in which the leased property is situated. "Sec. 36. All royalty accruing to the United States under any oil or gas lease or permit under this Act on demand of the Secretary of the Interior shall be paid in oil or gas: Provided, That if the Secretarv of the Interior shall not be satisfied with the market price of oil prevailing in the field he shall elect to take the oil royalty thereafter accruing in kind in lieu of in money. "The Secretary of the Interior shall, from time to time, except whenever in his judgment it is desirable to retain the same for the use of the United States, offer for sale for such period as he may determine, upon notice and advertisement on sealed bids or at public auction, all royalty oil and gas which he has elected to take in kind. Such ad- vertisement and sale shall reserve to the Secretary of the Interior the right to reject all bids whenever within his judgment the interest«of the United States demands; and in cases where no satisfactory bid is received or where the accepted bidder fails to complete the purchase, or where the Secretary of the Interior shall determine that it is unwise in the public interest to accept the offer of the highest bidder, the Secretary of the Interior, within his discretion, may readvertise such royalty for sale, or sell at private sale at not less than the market price for such period: Provided, however, That pending the making of a permanent contract for the sale of any royalty oil, or gas as herein provided, the Secretary of the Interior may sell the current product at private sale, at not less than the market price: And provided further, That any royalty oil, or gas may be sold at not less than the market price at private sale to any department or agency of the United States." Sec. 3. The Act approved March 4, 1917 (39 Stat. 1150; U. S. C., title 16, sec. 520), insofar as inconsistent with this Act; the Act of July 8, 1940 (54 Stat. 742; U. S. C., title 30, sec. 226a); and section 1 of the Act of July 29, 1942 (56 Stat. 726; U. S. C., title 30, sec. 226b), as amended, are hereby repealed. Sec. 4. No repeal or amendment made by this Act shall affect any rights acquired under the law as it existed prior to such repeal or amendment, and such right shall be governed in all respects by such preexisting law.REPORT OF THE DEPARTMENT OF THE INTERIOR, ON S. 1236 March 15, 1946. Hon. Carl A. Hatch, Chairman, Committee on Public Lands and Surveys, United States Senate. My Dear Senator Hatch: Reference is made to your letter of July 7, requesting a report on S. 1236, a bill to promote the develop- ment of oil and gas on the public domain and on lands acquired for the Appalachian National Forest and for other purposes. I am in accord with most of the major objectives of the bill and recommend its enactment, subject to the adoption of the suggestions that I shall make, both as to the changes that the bill would effect in existing law and those which I believe should be made although not contained in the bill. The bill would amend in several important particulars sections 1, 17, 27, 30, and 36 of the act of February 25, 1920 (41 Stat. 437, 30 U. S. C. sec. 181), as amended. Although the mineral leasing act initiated a new and better system for disposing of the oil and gas in the public lands, obviously, periodic revision is necessary if the Government's leasing system is to keep abreast of the changing needs of the dynamic oil industry. Thus, in 1935, sections 13, 14, and 17 of the law were radically amended by the abolition of prospecting permits and by the substitution of a straight leasing system at an annual acreage rental. Since then, the need for certain changes has become apparent in order to promote the development of the public lands. Briefly, those proposed in the bill are as follows: (1) It is proposed to extend the law, which now applies only to public domain land, to lands acquired under the provisions of the Appalachian Forest Act of March 1, 1911 (36 Stat. 961, 16 U. S. C., sec. 552)—page 1. (2) Only lands in known geologic structures of producing oil or gas fields would be subject to competitive leasing. Now any lands known or believed to contain oil or gas may be leased competitively—page 2, lines 6 and 7. (3) The flat 12% percent royalty rate, granted by law to the lessee on production for 10 years after discovery from a new oil or gas field discovered on his lease during the present emergency, would be ex- tended for the life of the lease to any such discovery made at any time, and lessees who contributed or those who would have contributed to the drilling of a well drilled within 2 miles of their lease, if oil or gas had not been discovered, would be given the same royalty rate for such portion of their leased lands as the Secretary determines to be equitably entitled to the 12y2 percent rate—page 5, lines 8 to 25, inclusive. (4) Rentals on leases would be waived after discovery but in lieu thereof the lessee would be required to pay a minimum royalty of $1 per acre at the expiration of each twelve-calendar-month period follow- 8DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 9 ing discovery. Rentals are now $1 per acre per annum beginning with the first lease year after discovery of oil or gas on the geologic struc- ture on which all or part of the leased land is situated, the rentals being credited against royalties accruing during the lease year—page 4, lines 12 to 14, inclusive. (5) (a) The maximum area of land that may be acquired by one lessee would be increased from 7,680 acres in any one State to 15,360 acres; page 9, lines 23 and 24; page 10, lines 1 and 2. (b) The 2,560-acre limitation on any one producing structure now provided by law would be repealed. (c) Options to purchase or otherwise acquire oil or gas leases are authorized, provided such options are coupled with an obligation to do geophysical work, are limited to a total of 100,000 acres in any one State, and are for a period of not to exceed 2 'years unless approved by the Secretary of the Interior; page 10, lines 16 to 25, inclusive. (d) Leases obtained by competitive bidding would be excepted in determining holdings or control under the acreage limitation of any section of the act; page 2, lines 11, 12, and 13. (6) The bill would grant the right to one renewal of a lease issued for a term of 5 years if the land is not in a known geologic structure of a producing oil or gas field at the end of its initial term. Now a lessee may exercise a preference right to a new lease for successive 5-year periods; page 3, lines 15 to 25, inclusive; page 4, lines 1 to 3, inclusive. (7) The bill would extend nonproducing oil and gas leases— (a) Not subject to renewal and upon which drilling is in progress on the lease at the expiration of the 5-year term for a . 2-year period; page 4, lines 2 to 8, inclusive; (b) Segregated from the original lease by assignment, for a period of 2 years after discovery upon any other segregated por- tion of such lease; page 15, lines 3 to 8, inclusive; (c) For not less than 2 years after elimination from a unit area; page 12, lines 19 to 23, inclusive; and (d) For a period equivalent to that for which compensatory royalty has been paid; page 8, lines 6 to 10, inclusive. At present, such leases cannot be extended beyond their fixed term unless subject to extension under the act of July 29, 1942 (56 Stat. 726; 30 U. S. C., sec. 226b), as amended. (8) The Secretary having jurisdiction over Federal lands com- mitted to a unit plan would be authorized to delegate to such person, committee, or State or Federal agency, as may be designated in the plan, authority to alter or modify from time to time the rate of prospecting and development and the quantity and the rate of pro- duction under the plan, page 7, lines 4 to 12, inclusive. The law now requires that the unit plan reserve that right, limited as therein pro- vided, in the Secretary having jurisdiction over the Federal lands in the unit area. . • (9) The bill would permit the unitization of a part of any single oil or gas pool, field, or area, page 12, lines 2 to 7, inclusive. The law now limits unitization to all of any single pool, field, or area. (10) Assignments would be permitted without the prior approval of the Secretary, page 14, lines 9 to 16, inclusive. (11) A lease might be relinquished without the consent of the Secretary, page 15, lines 8 to 20, inclusive.10 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN (12) The bill would abolish the right of the Secretary to fix a minimum value for oil for the purpose of computing royalty and require him to take the royalty oil in kind if he is not satisfied with the pre- vailing market value, page 16, lines 22 to 25, inclusive. I am in complete agreement with items 4, 5 (b), and 11. I am also in accord with items 1, 5 (a) and (c), 6, 7 (a), (b), (c), 9, and 10, sub- ject to specific changes. I am compelled to object to items 2, 3, 5 (d), 7 (d), 8, and 12, but as to item 8, I would offer no objection to substi- tution of the word "may" for "shall" in the comparable provision of the act of August 21, 1935. Such change is made in the attached substitute draft of bill. For convenience, each of these proposals will be discussed separately. (1) The basis upon which the bill would extend the provisions of the mineral leasing act to lands acquired under the so-called Ap- palachian Forest Act is that all lands of the United States should be administered by one agency so far as concerns disposal of the mineral deposits in them. Moreover, considerable prospective mineral- bearing acreage has been acquired by the United States under said act or under other acts or by condemnation, for which either no adequate or no specific statutory authority exists for the leasing of 011 or gas or other minerals. The provisions of the bill are not as broad as the justification. It is, therefore, suggested that section 1 of the bill be so amended as to include all lands owned or acquired by the United States except such as are embraced in the naval petroleum reserves, national parks and monuments, and in cities, towns, and villages. The revenue derived from the leasing of minerals in the acquired lands would be disposed of as provided under existing laws governing such lands. In order to facilitate your consideration of this and other proposed changes in the bill there is submitted a substitute draft to effectuate the proposed changes. (2) I see no justification for limiting the right to lease lands by competitive bidding to known structures of producing oil or gas fields, as proposed in the second sentence of section 17 of the bill. Under present law the Secretary of the Interior is authorized to lease by competitive bidding lands known or believed to contain oil or gas. The areal extent of oil or gas structures prior to complete develop- ment is often difficult to determine with any degree of precision. Con- ferring upon the Secretary authority to lease by competitive bidding lands known or believed to contain oil or gas affords sufficient latitude to sell competitively to the highest bidder lands which, although tech- nically unproved, are recognized by geologists as valuable for oil or gas. (3) The flat royalty rate of 12}£ percent granted for 10 years after discovery by the act of December 24, 1942 (56 Stat. 1080), was limited to discoveries made during the period of the present national emergency and to the lease on which the discovery is made. Because the number and location of wells within unitization areas are limited in the interest of conservation, the same flat rate of royalty was extended by regulation for the same period and under like conditions to all leases in any unit plan upon which a new oil or gas field or deposit is discovered (43 CFR 192.56a-192.56g, Circular 1528, May 3, 1943, 8 F. R. 6141). The purpose of the act of December 24, 1942, was to encourage prospecting during a period of extreme need and at aDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 11 time when, labor was scarce and drilling equipment difficult to obtain. The need for such encouragement in normal times, particularly if certain liberalizing features of this bill are enacted, is not apparent. Hence, its continuance after the termination of the present emergency or an increase in the period during which the reduced royalty rate is applicable is not justified. Nor is there any justification for extending the flat rate to contributors or would-be contributors to the drilling of the well, particularly in view of the extension of the same royalty rate to unitized leases. The proposed extension to such contributors would be difficult to administer and would afford a favorable basis for the assertion of unfounded claims. The present law is adequate and the proposed amendment is unnecessary and should be eliminated from the bill. (4) In practical effect the only differences between the payment of minimum royalty as provided on page 4 of the bill and the payment of acreage rental under the present law are that the former would be paid at the end of a 12-month period instead of at the beginning of the period and the annual period would run from the date of the discovery rather than from the first anniversary date of the lease following the discovery. Waiver of rental after the discovery is not uncommon and the substitution of the minimum royalty assures the same revenue to the Government. The $5,000 bond which the lessee is required to maintain would protect the Government from loss through the failure of a lessee to pay the minimum royalty when it accrues. It is prefer- able for administrative and accounting reasons to have minimum royalties payable on a lease-year basis, and it is therefore suggested that the bill be amended to provide for the payment of the minimum royalty at the end of each lease year commencing on or after a dis- covery. (5) I have no objection to the repeal of the limit on holdings on any producing structure nor to permitting an operator to take option on leases for geological and geophysical prospecting purposes, but the maximum area permitted under such options should be reduced to a more reasonable figure than 100,000 acres. The option provision legalizes with certain restrictions a method that has been commonly employed by industry in the past several years to assemble sufficient acreage to warrant extensive geophysical work, particularly in areas where structural and stratigraphic features cannot be easily determined. The cost of exploratory work to find new oil deposits has increased appreciably in recent years due to deeper drilling and the difficulties involved in locating prospective oil pools in areas where the subsurface geologic features cannot be interpreted from formations exposed at the surface. If prospecting of the public domain is to be encouraged some such procedure is essential. The provision should be expanded to cover geologic as well as geophysical work. The maximum area that may be optioned should be reduced to 64,000 acres the equivalent of an area 10 miles square. Almost invariably public land holdings are interspersed with privately owned and State lands and thus an option for 64,000 acres of Federal land may be combined with options for privately owned and State lands so as to assemble an acreage greatly in excess of the public land holdings. Besides, after any area held under option is prospected, the operator may surrender his options and acquire other options for additional land. It is also believed that the words "in the aggregate" U. OF ILL Ub.12 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN should be deleted from the provision as they appear to serve no useful purpose and are of doubtful interpretation. These changes have been made in the substitute draft of the bill. The option provision, however, is not a final solution to the problem of making lands avail- able for exploration. Moreover, this provision will be burdensome upon the Department, requiring much additional work. If it becomes law additional funds to cover the cost of its administration will be needed and I shall request the Congress to make the necessary appropriations. In 1920, when the Leasing Act became a law there were relatively few producing oil or gas structures in the public-land States. The market for oil and gas from these structures was confined to a small area and under these conditions the ownership or control by one per- son of all or most of any one structure could have resulted in a local monopoly. For this reason the limitation of 7,680 acres in any one State was wise. Today the number of producing structures in the oil- producing public land States has been multiplied and many pipe lines have been built to enlarge the market area. Hence, some liberaliza- tion in the acreage limitation appears justified. Many oil and gas fields, however, are limited in their capacity. The holding of 7,680 acres in some instances may permit of the production of immense quantities of oil or gas while in others the holding of the same amount of acreage may yield relatively little oil or gas, either because the available quantity of oil or gas is limited or because the field is in the declining stages of production. It may be in the public interest to permit some lessees to acquire additional acreage, particularly where their holdings comprise fields where production has declined ma- terially, in order that they may continue in the business of producing oil or gas. Several oil companies and individuals, however, already hold in excess of 7,680 acres in the principal oil-producing States of the West under the unit-plan provisions of the law. If, in addition, they are to be permitted to hold more acreage, care should be taken to insure that such holdings are not used as the basis for or an aid in the concentration of control over the production and sale of oil and gas. Consequently, I recommend that additional acreage, not to exceed 12,320 acres, be permitted to be held by any lessee only where the Secretary of the Interior determines that such additional holdings will not be so used and will be in the public interest. There is no justification for excluding leases sold by competitive bidding from acreage charges as long as holdings under the act are to be limited by such a policy. Such leases already cover a substantial portion of the known producing acreage and the percentage of such acreage is increasing. The law already excepts leases in unit plans from the acreage charge and many of these plans cover producing structures. While there is a basis for such an exemption for leases included in unit plans, there is none apparent as to leases sold by competitive bidding. I, therefore, recommend that the concluding phrase in the second sentence in section 17, which follows the word "possible" in line 11, page 2, be stricken from the bill. (6) The holder of a noncompetitive oil and gas lease for lands not within the geologic structure of a producing oil or gas field is now en- titled to a new lease if he files an application therefor within 90 days prior to the expiration of his lease (act of July 29, 1942, 56 Stat. 726; 30 U. S. C., sec. 226b). The proposed amendment, set forth on pagesDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 13 3 and 4 of the bill, would grant the right to a renewal of the lease but would limit a lessee to one renewal; otherwise, there would be no change in the law. I suggest in lieu of this provision that a lessee be granted the right to one 5-year extension of his lease subject to the rules and regulations in force at the date of expiration of the initial 5-year term of the lease provided that the lands were not at that time withdrawn from leasing. This would produce the same result so far as the lessee's rights are concerned and it would avoid the administra- tive detail necessary to the issuance of a new lease. One exception should be made to the defeat of an extension by a withdrawal existing on the expiration date of the lease. This is where the lessee has commenced actual drilling operations prior to the with- drawal and is diligently prosecuting such operations on the expiration date. Such a lessee has equities in his favor which should entitle him to a lease extension despite the subsequent withdrawal. (7) The proposed extensions of the initial term of a lease not sub- ject to renewal upon which drilling is in progress and of a lease elimi- nated from a unit plan are desirable. The former would protect dili- gent lessees who have been unable to complete their prospecting oper- ation during the 5-year term of the lease. The latter gives the lessee who surrenders his exclusive right to drill in the interest of conserving the oil and gas deposit an opportunity to drill his lease before it expires where, for any reason, it is excluded from the unit area. However, where the leased lands havo been withdrawn at the expiration of the initial term of the lease, the lessee should be entitled to an extension only if he commenced drilling operations prior to the withdrawal, 'llie substitute draft so provides on page 7. Section 30, as amended in the bill, at page 15, lines 3 to 8, provides for the extension of portions of oil and gas leases segregated by assign- ment for not less than 2 years after the date of discovery of oil or gas in paying quantities upon any other segregated portion of the lands originally subject to such lease. Such extension is desirable where the assignment is made when the unexpired portion of the primary term of the lease is of short duration. Such assignments are often made as a means of providing for the drilling of a well upon either the retained or assigned part of the lease, thus promoting the development of the public lands. As now phrased, however, tlie amendatory pro- vision would permit one segregated part of a lease to benefit from a discovery made on another portion of the lease near the end of the initial 5-year term notwithstanding that the assignment had been made immediately after the issuance of the original lease. Thus, a lessee who made an assignment at any time could obtain a greater benefit than a lessee who had not, since the latter would be required to drill in order to obtain an extension. The same unwarranted benefit would be conferred upon an assignee in the above hypothetical situa- tion. Accordingly, the extension period should apply only as to assignments made not more than 2 years prior to the expiration of the primary term of the lease and its benefits should apply only to the lands involved in those assignments. It is also proposed in section 17, lines 6 to 10, inclusive, page 8r to extend a lease for a period equivalent to any period during which compensatory royalty is paid. I see no reason for such an extension and recommend the elimination of this provision from the b:ll. In such a case, the lease is known to coHta'h oil or gas. The lessee is not 84034—46-3 *14 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN required to prospect for oil or gas but may drill with a reasonable certainty of obtaining production. In such a case he has a positive duty to drill. If he elects to pay compensatory royalty, he does so in his own interest. (8) The Department has no serious objection to elimination of the so-called mandatory provision for departmental jurisdiction over unit plans. It is not in all cases essential or advisable to require that exclusive control be exercised by the Secretary of the department having jurisdiction over the Federal lands in the unit area, and actually in some cases no such exclusive control has been retained. In those cases, the major portion of the unitized acreage was non-Federal land and, consequently, jurisdiction and control over the unit area is exer- cised jointly by the Secretary and by the appropriate State regulatory commission. In other cases, owners of large fee acreage committed to a unit plan have been permitted to exercise partial control over their own acreage in certain circumstances. The proposal set forth in the bill that authority to control operations on Federal land might be delegated to "such person, committee, State, or Federal officer or agency as may be designated in the plan" would constitute a delegation of secretarial authority irrevocable during the life of the agreement. Accordingly, the mandatory requirement, should be replaced by a discretionary one rather than by a power to irrevocably delegate control to someone else. In view of the proposed incorporation of acquired lands under the Mineral Leasing Act, the amendment would vest such discretionary authority in the Secretary of the Interior rather than the head of the department having jurisdiction over such lands. (9) The proposed extension of the principles of unitization to parts of any single oil or gas pool, field, or area, contained in the proviso to section 27, beginning on line 25 of page 11 of the bill, is contrary to the basic concept of unitization. Unitization of part of a single pool, field, or area, as proposed in the bill, would not eliminate un- necessary competitive drilling nor permit the application of conserva- tion measures to problems of secondary recovery or the control of wells with excessive oil-gas ratios, or other major problems which to be effective requires the cooperation of all interests in the particular pool, field, or area. The unitization provisions now contained in sections 17 and 27 of the act, however, need clarification in language. The substitute draft undertakes to do so by combining the provisions in a new section 17 (b) (p. 6) and removing ambiguities in phraseology. It is assumed that the proposed extension of unitization to well sites, contained in the proviso to section 27, beginning on line 25 of page 11, is intended merely to permit of the consolidation of small tracts to create drilling units. A few agreements for this purpose have been approved during the present war as emergency measures to prevent the uncompensated drainage of small tracts of public lands. To make this purpose effective the present language of the bill should be replaced by express language to achieve this objective. (10) The mineral leasing regulations and the leases themselves now provide that no assignment shall be made without the prior approval of the Secretary. Manifestly, it is essential that all assignments be approved as otherwise the leases might pass into the hands of persons not qualified to hold them. However, in practice, the assignee often desires to begifL development work immediately without awaiting theDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 15 approval of his assignment and there is no objection to this if the interests of the United States are protected as they would be under the provisions of the bill. In addition, assignments of parts of leases which are in their extended term because of production should be authorized so that the segregated, undeveloped portion would continue as a separate lease for 2 years from the effective date of such assignment. Where such an assignment is now made it would result in the im- mediate termination of the segregated, undeveloped portion of the lease since there is no production to support its continued existence. (11) I endorse, in principle, the proposal that a lessee should have a right of relinquishment of the whole or any part of his lease, provided all accrued obligations are fulfilled. I can see no substantial prejudice to the United States in this concession if the words " other than a drilling obligation" in line 19, page 15, are omitted, and a slight change or two is made to aid administration. Undoubtedly many persons are reluctant to assume lease obligations which can be sur- rendered only on approval by the Secretary of the Interior. The Federal Government, as a landowner, gains little by a procedure under which a reluctant lessee retains his leasehold rights. Any disadvan- tage which may be inherent in this proposed new procedure, in my opinion, is far outweighed by the advantages that will accrue. Both the proposal to permit assignment of leases without prior approval and the proposal to allow surrender of leases without any approval undoubtedly result from the fact that there is considerable delay in acting upon such matters in the Department. This delay is directly chargeable to the lack of sufficient clerical and technical force to perform the work necessary to final action on assignments and surrenders as well as all other necessary work connected with the leasing of oil and gas. This situation not only results in discontent among lessees and applicants but actually delays prospecting and development and results in a present loss of revenue to the United States. An increase in the appropriation for the General Land Office and the Geological Survey to be applied to their mineral leasing activities would permit prompter attention to such important matters and obviate 90 percent of the criticism from which these two proposed amendments stem. (12) The first proviso to section 36 would take away the right of the Secretary to fix the value of the oil for royalty purposes and require that if he is dissatisfied with the posted field price he take payment of the royalty in oil. I am unalterably opposed to the enactment of this provision. In several cases, the posted field price has been found to be lower than the price of oil of the same grade produced and marketed under comparable conditions. This posted field price is generally established by the major purchasers of oil in the field. In such cases, the lessees have been billed on account of royalty at a rate commensurate with the prevailing market price in the general area for oil of the same grade. In those cases, the pur- chasers of the oil were able to fix arbitrary prices. If the United States were required to take its royalty oil in those circumstances, the only likely purchaser would be the owner of the facilities for transportation from the field. There could therefore be no real competitive market for the royalty oil. It is inconceivable that the Government would recognize and pay tribute to a practice so inimical to its interests and to the interests of the other royalty holders. The16 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN right of the Secretary to establish minimum values for royalty pur- poses on account of oil produced from Kettleman Hills, Calif., is*now involved in the case of United States v. General Petroleum Corporation of California et al., No. 467, Civil, in the United States District Court for the Southern District of California. I feel confident that the right will be upheld and I urge that this provision be eliminated from the bill. The primary purpose of this bill being to eliminate objectionable features of the present law and to provide a more adequate method of leasing oil and gas deposits, I suggest the following additional amendments: Section 16 of the act should be amended to eliminate any reference to permits and in addition the prohibition against drilling within 200 feet of any of the boundaries of the leased lands unless the title to the adjoining lands has passed out of the United States should be elim- inated. If there was ever any reason for this provision it no longer exists and instead of being helpful the provision is harmful. There are several small tracts of land of less than 400 feet in width in some of the most productive oil fields which, under this provision, can only be leased at auction to the owners of adjacent leases. It results that there is little if any competition in the disposal of such fractional areas even though 4;he value of the oil or gas which they contain would otherwise result in intense competition. Some of these tracts may be drained of their oil or gas content through leases issued at the low royalty rate of 5 percent. Others occupy strategic positions for drilling purposes in unit plans. In one cooperative agreement, secondary recovery, through strategically located wells, has been de- feated since wells could not be properly located because some in- dividual tracts were not subject to the agreement. The Secretary should have authority to approve wells if closer than 200 feet to a line where determined necessary and advisable. There have been instances where lessees desired to store in the public lands gas produced from oil leases which was not marketable under the existing conditions until such time as the gas may be needed or required. Although this is essentially in the interest of conserva- tion, in that it preserves a valuable fuel and power asset which other- wise would be wasted, there is doubt as to the authority to permit such storage in the public lands. Of course, some charge would have to be made for the use of such lands. Express provision has been made in section 17 (b), page 9 of the substitute draft, for such au- thority including charges for such storage. Like the present law, section 17 of the bill would provide for issuing leases within the geologic structure of a producing oil or gas field for an initial period of 10 years and those outside of such a structure for 5 years. There is no sound reason for any such difference. If the owner of a wildcat lease is given only 5 years within which to make a discovery, certainly that is time enough for the owner of a lease on a producing structure to drill. The substitute draft provides for a 5- year term for both types of leases (sec. 17, p. 4). All leases are now issued for a fixed term "and so long thereafter as oil or gas is produced in paying quantities." Under such a lease when production once obtained from a particular horizon in the leased land is depleted after the end of the fixed term, the lease automatically comes to an end. The lessee has no opportunity to sink his wells toDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 17 some deeper horizon or otherwise attempt to obtain further production from the lease. An effort has been made in the proposed substitute draft to protect the lessee's rights in such a contingency (sec. 17, p. 4). It is recommended that section 2 (a) of the act of August 21, 1935 (49 Stat. 679; 30 U. S. C., sec. 223a), be amended so as to permit the exchange of leases earned under the terms of the original mineral leas- ing act but not issued until after August 21, 1935, or of renewals of such leases for terms of 10 years. As now phrased the law applies only to such leases issued prior to August 21, 1935. The same reasons exist for permitting the exchange of the former as the latter. The proposed substitute draft would extend this exchange privilege to all such leases, including renewal leases under the original act (sec. 17 (a), P* 6)* Section 17 of the bill, beginning on line 17 of page 6, like the present law, provides for the extension of leases issued for a term of 20 years for the life of any approved cooperative or unit plan to which it is committed and that all such extended leases be reported to the Congress. There is no specific provision either in the present law or in the bill which expressly provides for the extension of 5- and 10-year leases which have been committed to any such plan upon which a discovery has been made. In my opinion, any leases which are com- mitted to a unit or cooperative plan should be given a like extension provided that oil and gas is being produced from some part of the unitized area. In fact, the Department has been following- the prac- tice of recognizing such extensions. The proposed substitute has been so drafted as to expressly sanction this practice (sec. 17 (b), p. 8). The requirement for a report to the Congress of all 20-year leases which have entered their extended term by reason of their unitization has been omitted from the draft. This requirement does not apply to other leases which have been extended by reason of production nnder a unit plan and its repeal would eliminate an administrative action which serves no useful purpose. The act of July 8, 1940 (54 Stat. 742; 30 U. S. C. sec. 226a), waives the annual rentals for the second and third years on leases not within any known geologic structure of a producing oil or gas field unless a valuable deposit of oil or gas be sooner discovered, and such provision has been incorporated in S. 1236, lines 14 to 18, page 4. It is recom- mended that the act be repealed and that the provision contained in S. 1236 be deleted. There is no reason for permitting a lessee to hold public land rent free without development. The relatively low rate of rental of 50 cents an acre for the first year and 25 cents an acre for each subsequent lease year charged for undeveloped Federal lands is sufficiently low to encourage the acquisition of leases without waiver of the second- and third-year rentals. The sentence in section 27, beginning with line 3, page 11, of the bill, which follows the proposed option amendment already discussed in this report provides that any interest held in violation of the act shall be forfeited to the United States. This provision which would be applicable to the proposed amendment is also applicable to a viola- tion of the third proviso to section 1 of the act which forbids stock ownership, stock holding, or stock control of a lessee corporation by citizens of countries which do not accord similar rights to citizens of this country. In its practical application to cases where only a part of the stock is held by citizens of such countries the language although18 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN clearly implying does not specifically provide that the entire lease may be forfeited. If the courts, which have not as yet construed this pro- vision, should hold that it does not permit that to be done it would result that the United States would become a part owner in the lease- hold estate which is inconsistent with the whole theory of the Leasing Act. In addition, the interest to be forfeited may be only a small fraction of the leasehold estate and it may be preferable in some cir- cumstances to require that the person or persons illegally owning or controlling the interest be required to dispose of it to a person or persons competent to hold such an interest under the act. In order to remove this uncertainty and to make the provision more workable it has been rephrased in the proposed substitute draft to accomplish these objectives. Section 17, as set forth in the bill at pages 4 and 5, contains pro- visions (a) for suspending payment of rental and royalty on oil and gas leases where the Secretary has approved suspension of operations or production and for the extension of the term of the lease for the period of such suspension and (b) for the waiver, suspension, or reduc- tion of rental or royalty on leases valuable only for the production of gas where necessary to permit continued economic operation. In addition, the same section at page 8 provides that where production on a lease does not exceed an average of 10 barrels of oil per well per day or where the cost of production of oil or gas renders further production economically impracticable, the Secretary is authorized to reduce the royalty on new production. Section 39, which was made part of the Mineral Leasing Act by the act of February 9, 1933 (47 Stat. 798; 30 U. S. C., sec. 209), provides that in case there is a suspen- sion of operations and production of coal, oil, or gas, the payment of rental or royalty shall likewise be suspended and the term of the lease extended for the period of such suspension. I recommend that sec- tion 39 be revised to include, all of these provisions in one harmonious section to be equally applicable to all oil and gas leases and to ap- proved unit or cooperative agreements. The substitute draft contains several technical changes such as having each section contain the amendments to only one section of the act, eliminating references to permits and associated terms no longer applicable and providing for the repeal of the sections, acts, and parts of acts incorporated in the draft or no longer deemed necessary. The Bureau of the Budget has advised me that there is no objection to the presentation of this report for the consideration of your com- mittee, subject to the understanding that "this advice involves no commitment as to the relation of the program of the President to the bill in its present form or the various recommendations contained in the Department's proposed report." Sincerely yours, Oscar L. Chapman, Acting Secretary of the Interior. A BILL To amend the Mineral Leasing Act, of February 25, 1920, as amended, in crirr to promote the development of oil and gas on the public domain and'on lands acquired by the United States, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 1 of the Act of February 25, 1920 (41 Stat. 437, 30 U. S. C. sec. 181 et seq.), as amended, be amended to read as follows:DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 19 "That deposits of coal, phosphate, sodium, potassium, oil, oil shale, or gas, and lands containing such deposits owned by the United States including all lands heretofore or hereafter acquired by the United States and lards In national forests whether created from public lands or acquired lands, but excluding lands situated within incorporated cities, towns and villages and in national parks and monuments, lands and deposits of gas acquired for the production and conserva- tion of helium, and lands within the naval petroleum and oil-shale reserves; except as hereinafter provided, shall be subject to disposition in the form and manner provided by this Act to citizens of the United States, or to associations of such citizens or to any corporation organized under the laws of the United States, or of any State or Territory thereof, or in the case of coal, oil, oil shale, or gas, to municipalities. Citizens of another country, the laws, customs, or regu- lations of which, deny similar or like privileges to citizens or corporations of this country, shall not by stock ownership, stock holding, or stock control, own any interest in any lease acquired under the provisions of this Act. "No acquired land shall be leased except with the consent of the head of the executive department, independent establishment, or instrumentality having juris- diction over the lands or holding a mortgage or deed of trust secured by such lands which is unsatisfied of record and subject to such conditions as that official may prescribe to insure the adequate utilization of the lands for the primary purpose for which they have been acquired or are being administered. Lands set apart for Indian use, including lands, the jurisdiction over which has been transferred to the Department of the Interior by Executive order for Indian use shall be subject to the act entitled 'An Act to regulate the leasing of certain Indian lands for mining purposes,' approved May 11, 1938 (52 Stat. 347, 25 U. S. C. se°s. 396a-396f). The United States reserves the ownership of and the right to extract helium from all gas produced from lands leased or otherwise granted under the provisions of this Act, under such rules and regulations as shall be prescribed by the Secretary of the Interior: Providedy That in the ex- traction of helium from gas produced .from such lands, it shall be so extracted as to cause no substantial delay in the delivery of gas produced from the well to the purchaser thereof." Sec. 2. Section 16 of the Act is amended to read as follows: "Sec. 16. That all leases of lands containing oil or gas, made or issued under the provisions of this Act, sh.all be subject to the condition that the lessee will, in conducting his explorations and mining operations, use all reasonable precau- tions to prevent waste of oil or gas developed in the land, or the entrance of water through wells drilled by him to the oil sands or oil-bearing strata, to the destruction or injury of the oil deposits. Violations of the provisions of this section s1'aU constitute grounds for the forfeiture of the lease, to be enforced, as provided in this Act." Sec. 3. Section 17 of the Act is amended to read as follows: ^Sec. 17. All lands subject to disposition under this Act which are known or believed to contain oil or gas deposits, except as herein otherwise provided, may be leased by the Secretary of the Interior to the highest responsible qualified bidder by competitive bidding under general regulations, in units of not exceeding six hundred and forty acres, which shall be as nearly compact in form as possible, upon the payment by the lessee of such bonus as may be accepted by the Secre- tary. When the lands to be leased are not within any known geological structure of a producing oil or gas field, the person first making application for the lease who is qualified to hold a lease under this Act shall be entitled to a preference right over others to a lease of such lands without competitive bidding: All leases shall be conditioned upon the payment by the lessee of a royalty, in the case of oil, of 12}£ per centum in amount or value of the production when the said production does not exceed fifty barrels per well per day for the calendar month and of not less than 12}£ per centum in amount or value of the production when the said production exceeds fifty barrels per well per day for the calendar month, and, in the case of gas, of 12^ per centum in amount or value of the production when the said production does not exceed five million cubic feet per well per day for the calendar month and, when the said production exceeds five million cubic feet per well per day for the calendar month, of not less than 12}^ per centum in amount or value of the production. Leases issued under this section shall be for a period of five years and so long thereafter as oil or gas is produced in paying quantities. "Any lease issued under this Act upon which there is production after the initial five-year term shall not terminate when such production ceases if diligent drilling operations are in progress on the land during such period of nonproduction. "Upon the expiration of the initial five-year term of any noncompetitive lease maintained in accordance with applicable statutory requirements and regulations,20 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN the record titleholder thereof shall be entitled to a single extension of the lease,, unless then otherwise provided by law, for such lands covered by it as are not on the expiration date of the lease within the known geological structure of a produc- ing oil or gas field or withdrawn from leasing under this section. A withdrawal, however, shall not affect the right to an extension if actual drilling operations on such lands were commenced prior thereto and were being diligently prosecuted on such expiration date. Such extension shall be for a period of five years and so long thereafter as oil or gas is produced in paying quantities and shall be subject to such rules and regulations as are iii force at the expiration of the initial five-year term of the lease. No extension shall be granted unless an application therefor is filed by the record titleholder within a period of 90 days prior to such expiration date. Any noncompetitive lease which is not subject to such extension in whole or in part because the lands covered thereby are within the known geologic structure of a producing oil or gas field at the date of expiration of the initial five- year term of the lease and upon which drilling operations are being diligently prosecuted on such expiration date, shall continue in effect for a period of two years and so long thereafter as oil or gas is produced in paying quantities unless then othewise provided by law or unless prior to the commencement of such drilling operations such lands have been withdrawn from leasing under this section"and remain so withdrawn on such expiration date. "All leases issued under this section shall be conditioned upon the payment by the lessee in advance of a rental of not less than 25 cents p?r acre per annum. A minimum royalty of $1 per acre in lieu of rental shall be payable at the expiration of each lease year beginning on or after a discovery of oil or gas in paying quanti- ties on the lands leased. "Whenever it appears to the Secretary of the Interior that lands owned by the United States are being drained of oil or gas by wells drilled on adjacent lands, he- is hereby authorized and empowered to negotiate agreements whereby the United States or the United States and its lessees, shall be compensated for such drainage, such agreements to be made with the consent of the lessees affected thereby." Sec. 4. The Act is hereby amended by adding a new section to read as follows: "Sec. 17 (a). The Secretary of the Interior is authorized to issue a new lease in exchange for any lease issued for a term of 20 years under the Act of February 25, 1920, or any renewal thereof, such new lease to be at a royalty rate of not less than 121/2 per centum in amount or value of the production and upon such other terms and conditions as the Secretary of the Interior shall by general rule pre- scribe." Sec. 5. The Act is hereby amended by adding a new section to read as follows: "Sec. 17 (b). For the purpose of more properly conserving the natural resources of any single oil or gas pool, field, or like area, lessees thereof and their repre- sentatives may Unite with each other or jointly or separately with others in collectively adopting and operating under a cooperative or unit plan of develop- ment or operation of such pool, field, or like area whenever determined and certified by the Secretary of the Interior to be necessary or advisable in the- public interest. The Secretary is thereunto authorized, in his discretion, with the consent of the holders of leases involved, to establish, alter, change, or revoke drilling, producing, rental, and royalty requirements of such leases and to make such regulations with reference to such leases, with like consent on the part of the lessees, in connection with the institution and operation of any such coopera- tive or unit plan as he may deem necessary or proper to secure the proper protection of the public interest. The Secretary may provide that oil and gas leases issued under this Act shall contain a provision requiring the lessee to operate under such a cooperative or unit plan, and he may prescribe such a plan under which such lessee shall operate, which shall adequately protect the rights of all parties in interest, including the United States. "Any plan authorized by the preceding paragraph, which includes lands owned by the United States, may contain a provision whereby authority is vested in the Secretary of the Interior to alter or modify from time to time the rate of prospect- ing and development and the quantity and rate of production under such plan. All leases operated under any such plan approved or prescribed by the Secretary shall be excepted in determining holdings or control under the provisions of any section of this Act. "When separate tracts cannot be independently developed and operated in conformity with an established well-spacing or development program, a lease or a portion thereof may be pooled with other lands, whether or not owned by the United States, under a communitization or drilling agreement providing for an apportionment of production or royalties among the separate tracts of land com-DEVELOPMENT OF OIL AND. GAS ON THE PUBLIC DOMAIN 21 prising the drilling or spacing unit when determined by the Secretary of the In- terior to be in the public interest, and operations or production pursuant to such an agreement shall be deemed to be operations or production as to each such lease issued pursuant to applicable law that is committed thereto. "Any lease issued for a term of 20 years or any renewal thereof or any portion of such lease that has become the subject of a cooperative or unit plan of develop- ment or operation of a single pool, field, or like area, which plan has the approval of the Secretary of the Interior, shall continue in force until the termination of such plan. Any other lease issued under any section of this Act which is com- mitted to any such plan that contains a general provision for allocation of oil or gas shall continue in force and effect as to the land committed so long as the lease remains subject to the plan, provided oil or gas is discovered under the plan prior to the expiration date of the fixed term of such lease. Any lease which shall be eliminated from any such approved plan or from any communitization or drilling agreement authorized by this section, unless relinquished, shall continue in effect for the original term thereof but for not less than two years, and so long there- after as oil or gas is produced in paying quantities. "The Secretary of the Interior is hereby authorized, on such conditions as he ma}' prescribe, to approve operating, drilling, or development contracts made by one or more lessees of oil or gas leases, with one or more persons, associations, or corporations, whenever, in his discretion and regardless of acreage limitations pro- vided for in this Act, the conservation of natural products or the public con- venience or necessity may require it or the interests of the United States may be best subserved thereby. "The Secretary of the Interior, to avoid waste or to promote conservation of natural resources, may authorize the subsurface storage of oil or gas, whether or not produced from federally owned lands, in lands leased or subject to lease under this Act. Such authorization may provide for the payment of a storage fee or rental on such stored oil or gas, or for a royalty other than that prescribed in the lease when such stored oil or gas is produced in conjunction with oil or gas not previously produced. Any lease on which storage is so authorized shall be ex- tended at least for the period of storage." Sec. 6. Section 27 of the Act is amended as follows: "Sec. 27. No person, association, or corporation, except as herein provided shall take or hold coal, phosphate, or sodium leases or permits during the life of such leases in any one State, exceeding in the aggregate acreage two thousand five hundred sixty acres for each of said minerals; and no person, association, or corporation shall take or hold at one time oil or gas leases exceeding in the aggre- gate seven thousand six hundred eighty acres granted hereinunder in any one State; except where the Secretary of the Interior shall determine that the holding of more acreage would be in the public interest and would neither result in nor tend toward the creation of undue concentration or control over the production or sale of oil and gas he may lease additional acreage to the person, association, or corporation holding such area but in no event shall the total acreage held in oil and gas leases at one time in any State under the provisions of this section exceed twenty thousand acres in the aggregate- No person, association, or cor- poration shall take or hold at one time any interest or interests as a member of an association or associations or as a stockholder of a corporation or corporations holding a lease or leases, permit or permits, under the provisions hereof, which together with the area embraced in any direct holding of a lease or leases, permit or permits, under this Act, or which, together with any other interest or interests as a member of an association or associations or as a stockholder of a corporation or corporations holding a lease or leases, permit or permits, under the provisions hereof for any kind of minerals hereunder, exceeds in the aggregate an amount equivalent to the maximum number of acres of the respective kinds of minerals allowed to any one lessee or permittee under this Act. The interest of an optionee under an option to purchase or otherwise acquire one or more oil or gas leases, or any interest therein, when taken for the purpose of geological and geophysical exploration for the benefit of the leased land, shall not, prior to the exercise of such option, be a taking or holding under the acreage-limitation provisions of any section of this Act. No such option shall be entered into after June 1, 1945, for a period of more than two years and no person, association, or corporation shall hold at one time such options of more than sixty-four thousand acres in any one State. If any interest in any lease is owned or controlled, directly or indi- rectly, by means of stock or otherwise, in violation of any of the provisions of this Act, the lease may be canceled, or the interest so owned may be forfeited, or 84034—46-422 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN the person so owning or controlling the interest may be compelled to dispose of the interest, in any appropriate proceeding instituted by the Attorney General. Such a proceeding shall be instituted in the United States district court for the district in which the leased property or some part thereof is located or in which the lease owner may be found, except that any ownership or interest forbidden in this Act which may be acquired by descent, will, judgment, or decree may be held for two years and not longer after its acquisition. Nothing herein con- tained shall be construed to limit sections 18, 18a, 19, and 22 or to prevent any number of lessees under the provisions of this Act from combining their several interests so far as may be necessary for the purposes of constructing and carrying on the business of a refinery, or of establishing and constructing as a common carrier a pipe line or lines of railroads to be operated and used by them jointly in the transportation of oil from their several wells, or from the wells of other lessees under this Act, or the transportation of coal or to increase the acreage which may be acquired or held under section 17 of this Act: Provided, That any combination for such purpose or purposes shall be subject to the approval of the Secretary of the Interior on application to him for permission to form the same. Except as in this Act provided, if any of the lands or deposits leased under the provisions of this Act shall be subleased, trusteed, possessed, or controlled by any device permanently, temporarily, directly, indirectly, tacitly, or in any manner whatsoever, so that they form a part of or are in anywise controlled by any combination in the form of an unlawful trust, with the consent of the lessee, or form the subject of any^contract or conspiracy in restraint of trade in the mining or selling of coal, phosphate, oil, oil shale, gas, or sodium entered into by the lessee, or any agreement or understanding, written, verbal, or otherwise, to which such lessee shall be a party, of which his or its output is to be or become the subject, to control the price or prices thereof or of any holding of such lands by any indi- vidual, partnership, association, corporation, or control in excess of the amounts of lands provided in this Act, the lease thereof shall be forfeited by appropriate court proceedings." Sec. 7. The Act is hereby amended by adding a new section to read as follows: "Sec. 30 (a). Notwithstanding anything to the contrary in section 30 hereof Any oil or gas lease issued under the authority of this Act may be assigned or subleased, as to all or part of the acreage included therein, subject to final approval by the Secretary, and any assignment or sublease when so approved shall take effect as of the first day of the lease month following the date of filing in the proper land office of three original executed counterparts thereof together with any required bond and proof of the qualification under this Act of the assignee or sublessee to take or hold such lease. Until such approval, however, the assignor or sublessor and his surety shall continue to be responsible for the performance of any and all obligations as if no assignment or sublease had been executed; and, in the event that the Secretary for cause refuses to approve the assignment or sub- lease, the lessee and his surety shall remain liable for the continued performance of all of the terms and conditions of the lease. Any partial assignment of any lease shall segregate the assigned and retained portions thereof, and, to the same extent as in the last preceding sentence provided, release and discharge the assignor from all obligations thereafter accruing with respect to the assigned lands; and such segregated leases, shall continue in full force and effect for the initial term of the original lease. Where the land covered by a lease as of the period com- mencing not more than two years prior to the expiration of the initial term of such lease is segregated by one or more assignments effective, as hereinabove pro- vided, only within such two-year period, any discovery of oil or gas in paying quantities made prior to such expiration date upon any portion of the lease in- volved in any of such assignments shall be effective to continue, after the expira- tion of the initial term, the life of each undeveloped portion of the lease segregated within that period, to a date two years after the date of such discovery. Assign- ments under this section may also be made of parts of leases which are in their extended term because of production, and the lease as to any undeveloped acreage segregated thereby shall continue in full force and effect as a separate lease for two years and so long thereafter as oil or gas is produced in paying quantities." Sec. 8. The Act is hereby amended by adding a new section to read as follows: "Sec. 30 (b). Notwithstanding any provision to the contrary in section 30 hereof a lessee may at any time make and file in the appropriate land office a written relinquishment of all rights under any oil or gas lease issued under the authority of this Act or of any legal subdivision of the area included within the lease. Such relinquishment shall be effective as of the date of its filing, subject to the continued obligation of the lessee and his surety to make payment of allDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 23 accrued rentals and royalties and to place all wells on the lands to be relinquished in condition for suspension or abandonment in accordance with the applicable lease terms and regulations; thereupon the lessee shall be released of all obligations thereafter accruing under said lease with respect to the lands relinquished, but no such relinquishment shall release the lessee, or the lessee's bond, from any liability for breach of any obligation of the lease accrued at the date of the relinquishment." Sec. 9. Section 31 of the Act is amended to read as follows: "Sec. 31. Except as otherwise herein provided, any lease issued under the pro- visions of this Act may be forfeited and canceled by an appropriate proceeding in the United States district court for the district in which the property, or some part thereof, is located whenever the lessee fails to comply with any of the pro- visions of this Act, of the lease, or of the general regulations promulgated under this Act and in force at the date of the lease; and the lease may provide for resort to appropriate methods for the settlement of disputes or for remedies for breach of specified conditions thereof. "Any lease issued after August 21, 1935, under the provisions of section 17 of this Act shall be subject to cancellation by the Secretary of the Interior after thirty days' notice upon the failure of the lessee to comply with any of the pro- * visions of the lease, unless or until the land covered by any such lease is known to contain valuable deposits of oil or gas. Such notice in advance of cancellation shall be sent the lease owner by registered letter directed to the lease owner's record post-office address, and in case such letter shall be returned as undelivered, such notice shall also be posted for a period of thirty days in the United States Land Office for the district in which the land covered by such lease is situated, or in the event that there is no district land office for such district, then in the post office nearest such land." Sec. 10. Section 35 of the Act is amended to read as follows: "Sec. 35. All money received from sales, bonuses, royalties, and rentals of public lands under the provisions of this Act, excepting those from Alaska, shall be paid into the treasury of the United States and 10 per centum thereof credited to miscellaneous receipts; 52^ per centum thereof shall be paid into, reserved, and appropriated as a part of the reclamation fund created by the Act of Congress, known as the Reclamation Act, approved June 17, 1902; 37}£ per centum thereof shall be paid by the Secretary of the Treasury after the expiration of each fiscal year to the State within the boundaries of which the leased lands or deposits are or were located; said moneys to be used by such State or subdivisions thereof for the construction and maintenance of public roads or for the support of public schools or other public educational institutions, as the legislature of the State may direct. All moneys received under the provisions of this Act on account of minerals in Alaska shall be paid into the Treasury of the United States and credited to miscellaneous receipts. "Receipts derived from the minerals in acquired lands under the authority of this Act shall be paid into the same funds or accounts in the Treasury as receipts from the sale, lease, or rental or from the sale of products of the land have -been paid heretofore, the intention of this provision being that this Act shall not affect the disposition of receipts pursuant to previous legislation: Provided, however, that receipts from leases or permits for minerals in lands set apart for Indian use as defined in section 1 hereof shall be disposed of in accordance with the provisions of the Act of May 17, 1926 (44 Stat. 560, 25 U. S. C. sec. 155)." Sec. 11. Section 39 which was added to the Act by the Act of February 9, 1933 (47 Stat. 798, 30 U. S. C. sec. 209) is amended to read as follows: "Sec. 39. The Secretary of the Interior for the purpose of encouraging the greatest ultimate recovery of oil or gas and in the interest of conservation of natural resources is authorized to waive, suspend, or reduce the rental or minimum royalty or reduce the royalty on productive leases for an entire leasehold or on any tract or portion thereof segregated for royalty purposes, whenever in his judg- ment the leases cannot be successfully operated under the terms provided therein. The provision of this paragraph shall apply to all oil and gas leases issued under this Act, including those within an approved cooperative or unit plan of develop- ment and operation. The Secretary, in the interest of conservation, may direct or assent to the suspension of operations and production under any lease granted under the terms of this Act, or approved unit or cooperative agreement and any payment of acreage rental or of minimum royalty prescribed by such lease likewise shall be suspended during such period of suspension of operations and production; ( and the term of such lease shall be extended by adding any such suspension period thereto."24 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN Sec. 12. Section 5 of the Act approved February 7, 1927 (44 Stat. 1057, 30 U. S. C., sec. 285), is amended to read as follows: "Sec. 5. That the general provisions of sections 26 to 38, inclusive, of the Act of February 25, 1920, entitled "An Act to promote the mining of coal, phosphate, oil, oil shale, gas and sodium on the public domain," as amended, are made applicable to permits and leases under this Act, the thirty-seventh section thereof being amended to include deposits of potassium." Sec. 13. The Act approved March 4, 1917 (39 Stat. 1150, 16 U. S. C., sec. 520), so far as inconsistent with this Act; the Act of July 8, 1940 (54 Stat. 742, 30 U. S. C., sec. 226a); section 1 of the Act of July 29, 1942 (56 Stat. 726, 30 U. S. C., sec. 226b), as amended; and section 2 of the Act of August 21, 1935 (49 Stat. 679, 30 U. S. C., sec. 223a), are hereby repealed. Sec. 14. No repeal or amendment made by this Act shall affect any right ac- quired under the law as it existed prior to such repeal or amendment, and such right shall be governed by the law in effect at the time of its acquisition; but anv person holding a lease on the effective date of this Act may, by filing a statement to that effect within 90 days thereafter, elect to have his lease governed by the applicable provisions of this amendatory Act instead of by the law in effect prior thereto.REPORT OF THE DEPARTMENT OF AGRICULTURE ON S. 1236 March 8, 1946. Hon. Carl A. Hatch, Chairman, Committee on Public Lands and Surveys, United States Senate. Dear Senator Hatch: Mr. McMain's letter of July 7 states that your committee would appreciate a report by tliis Department on S. 1236, a bill to promote the development of oil and gas on the public domain and on lands acquired for the Appalachian National Forest, and for other purposes. Accordingly, the viewpoint of this Depart- ment is submitted as follows: The bill would (1) transfer to the jurisdiction of the Secretary of the Interior a part but not all of the authority now vested in the Secretary of Agriculture by the act of March 4, 1917 (39 Stat. 1150; 16 U. S. C. 520), to dispose of mineral resources in lands acquired under the provisions of the act of March 1, 1911 (36 Stat. 961), as amended, popularly known as the Weeks law, and (2) substantially amend the Mineral Leasing Acts now applicable to the public domain and to public lands reserved from the public domain or acquired other than under the Weeks law. The jurisdiction transferred to the Sec- retary of the Interior would relate to coal, phosphates, oil, oil shale, gas, and sodium, plus sulphur in the States of Louisiana and New Mexico only. All other minerals in the Weeks law lands would con- tinue subj ect to disposal by the Secretary of Agriculture* Conceivably, on a single tract of land, two types of mineral development could occur coincidentally under two permits or leases issued by two exec- utive departments. Lands purchased under the Weeks law were acquired by consider- able outlays of public funds and are permanently dedicated to certain important public objectives and services. This Department is charged by law with their proper administration for those purposes. Were oil and gas development coordinated with other uses and services of the same lands under a single jurisdiction, a minimum of conflict would occur. Under proper coordination with surface uses and activities, oil and gas or other mineral development is not only permitted by this Department but encouraged, as the Department's record during this war will show. But S,. 1236 would permit the Department of the Interior to lease any Weeks law lands anywhere without prior concurrence by the agency having responsibility for administering the surface; does not accord that agency any right to prescribe reasonable conditions to safeguard surface investments and uses. This Department recognizes that particular types of natural re- sources in Federal ownership frequently can be managed most effici- ently and economically by placing them under the jurisdiction of a single executive department. Likewise it recognizes the Department of the Interior as the traditional agency for the disposal of federally 2526 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN owned mineral resources. But it questions whether the mineral laws by which that Department currently is governed, influenced as such laws were by liberal principles of public-domain disposal, should be applied without qualification or safeguard to project lands acquired for particular public purposes at considerable public expense and administered by this Department pursuant to important and well-established objectives. S. 1236 does not stipulate that negative co isequences of mineral development shall be taken into account, nor that there be realized for the United States the full value of the mineral resources, nor that the revenues from such resources shall be credited against the capital and management costs of the lands from which derived. . Aside from the question of administrative coordination, S. 1236 presents an important question of public policy, namely, the pro- cedure to be followed in disposing of oil and gas privileges in lands which are not within the known geologic structure of a producing oil and gas field. Under the procedures of the Federal Mineral Leasing Act such lands are subject to the principle of first in time first in right; the first qualified applicant establishing a preference or priority under which the payment of a filing fee is all that is required, no competitive bid or bonus being necessary. The oil and gas regu- lations of this Department are based on a different principle, namely, that if an active competitive interest is found to exist within a parti- cular territory the oil and gas privileges will be disposed of only by competitive bid even though the lands are not within the known geologic structure of a producing field. Otherwise, this Department uses the same schedule of step-scale royalties as that used by the Department of the Interior and comparable rates of annual rental. The difference in financial return to the United States between the one principle and the other is strikingly illustrated by the following table, which is a digest of the attached list of oil and gas leases issued by this Department for lands acquired under the Weeks law. Receipts under Receipts the practice of under the this Depart- Mineral ment LeasingAct Bonuses for leases in unproved territory_____________________________________ $2, 0^5, 227. 78 0 Bonuses for leases in proven territory_______________________________________ 35, 859. 00 $35,859.00 Filing fees_______________________________________________________________ ... 0 1,466.00 Total bonuses and fees__________________________________ ______________ 2,071, 086. 78 37, 325.00 Payments to States_______________________________________________ 517, 771. 70 13,447.13 Net return to United States from bonuses and filing fees______________ 1, 553,315.08 23,877.87 Payments to reclamation fund_______________________________________________ 0 18, 825. 98 Net return to miscellaneous receipts, U. S. Treasury__________________ 1, 553, 315.08 5,051,. 89 In other words, in relation to the lands listed on the accompanying sheet, the listed leases although almost all in unproved territory resulted in bonus payments to the Treasury aggregating $2,071,068.78; whereas if the same leases had been issued under the currently pre- vailing procedure under the Federal Mineral Leasing Act bonus pay- ments would have been required in only four cases, and the initial payments would have aggregated only $37,325; or $2,033,761.78 less than the payments actually derived under the procedure followed by this Department.DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 27 If, under S. 1236, revenues from the oil and gas resources of the Weeks-law lands would be distributed in the same manner as similar revenues from the public domain, 52% percent thereof would be paid into the reclamation fund. Most of the Weeks-law lands are in States within which there are no Federal reclamation activities and the equity of using revenues derived from such States for reclamation projects in remote States is open to question. Oil and gas revenues from Weeks-law lands properly should be credited and distributed in the same manner as other revenues from the same lands. In the issuance of oil and gas leases, this Department adheres to the area limitation policies now prescribed by the Federal Mineral Leasing Act. Thus the intent of Congress to avert monopolization of pub- licly owned oil and gas resources has received complete recognition. S. 1236 would remove from the Mineral Leasing Act the provision that no person, 'association or corporation shall take or hold either directly or indirectly oil or gas leases exceeding in the aggregate 2,560 acres within the geological structures of the same producing oil * or gas field. The bill provides that leases shall be to the highest bidder in units not exceeding 640 acres each but does not limit the number of such units. The bill further provides that such lands shall be excepted in determining holdings or control under the acreage limitations of the act. A single interest by outbidding others could obtain absolute control over a producing field, or several of them. This Department feels that such a provision would be questionable at any time and is particularly so at this time when the encourage- ment of small business is a matter of much concern. With respect to- unproved territory the bill would markedly change hitherto prevailing policy. It would increase the State acreage limi- tation from 7,680 acres to 15,360 acres. There would not be debited against that limitation any acreage for which lease was obtained by competitive bid, or any acreage in an area covered by a cooperative or unit development plan. There would be no requirement of proof that the 15,360 acres did not wholly encompass the entire structure of a single producing field or that any part of the leased area be surren- dered if it proved to encompass a producing field. Oil operating in- terests have contended that since new reserves of oil are generally to be found only at great depth, with the cost of the test well and the preparatory seismographic work ranging from $100,000 up to $250,000, the risk of such large sums of capital can be expected or will occur only in the event that the initial operator is granted leases on a suffi- cient area to enable him to reap all of the rewards of his risk and effort. The modification of present policy contemplated by S. 1236 evidently is in recognition of that premise. Lines 8 through 25 of page 5 of the bill provide for the adjustment of royalties in certain contingencies. It is not apparent from the bill whether those provisions would apply to the leases hitherto issued by this Department. If applicable, the provisions would have the effect, in certain circumstances, of fixing a maximum royalty of 12% percent in lieu of the present provision for a royalty beginning at 12% percent and increasing by graduated rates according to the volume of oil pro- duced by the well. In this connection, there appears to be some ambiguity in the provision of subsection (b), commencing in line 12, with respect to wells drilled within 2 miles of the leased land.28 development of oil and gas on the public domain Certain of the more liberal conditions of oil and gas development contemplated by S. 1236 perhaps would have been justified as a war measure, but the war is now over and legislation which contemplates definite future commitments of publicly owned oil and gas resources for periods of ten years should be governed primarily by future rather than past economic needs and circumstances of the Nation. This Department recommends against the enactment of S. 1236 in its present form. It does not dissent to transfer to the Secretary of the Interior of jurisdiction over mineral resources which it now exercises, but it is firmly of the opinion that such transfer should be based on sound principles of interdepartmental action, which take fully into account the peculiar status of the lands involved. The Department does dissent to conditions which would markedly reduce the returns from the minerals in the lands of the United States. In the last Congress there was introduced a bill, ST 736, to promote the mining of minerals on lands acquired by the United States. With the exception of the lands acquired under the act of March 1, 1911 (36 Stat. 961), as amended, all lands under the jurisdiction of this Department would have been subject to the provisions of that bill. In its original form the bill was not acceptable to this Department, but following a long series of conferences and discussions with repre- sentatives of the Department of the Interior there was evolved a revision of the bill mutually acceptable to both Departments. A copy of that revised draft of bill is submitted herewith. If it is the conclusion and desire of the Congress that the disposal of all mineral resources in lands of the United States shall be by a single executive agency the most practicable and satisfactory way to establish that principle and procedure will be to enact the revised draft of bill submitted herewith, including among the lands subject to its provisions those lands acquired under the act of March 1, 1911, as amended. Such action is acceptable to this Department. The draft submitted has these merits: (1) The agency charged with responsibility for the attainment of certain public objectives on certain lands would be vested with power to determine the conditions under which the de- velopment of minerals on said lands would be consistent with the pur- poses for which they were acquired and are being administered; (2) the receipts from mineral resources of such lands would be credited and distributed in the same manner as other receipts from the same lands; and (3) the agency administering the lands would be empowered to authorize minor use of minerals for local purposes. These three requirements are indispensable to the orderly and economical manage- ment of mineral resources on acquired lands. This Department, therefore, recommends that S. 1236 be amended by striking out all except the enacting clause and by the substitution of the full text of the substitute draft of bill submitted herewith, amended to include the lands acquired under the act of March 1, 1911. The Bureau of the Budget advises that it has no objection to the submission of this report for the consideration of the committee but that such advice involves no commitment as to the relation to the program of the President of the bill in its present form or the various recommendations contained herein. Sincerely, Clinton P. Anderson, Secretary.OIL AND GAS LEASES IN EFFECT ON LANDS ADMINISTERED BY THE FOREST SERVICE State (1) Forest (2) , bidder, or applicant (3) Effective date (4) (5) Bonus paid or offered (6) Rental per acre per annum (7) Filing fee (Interior Depart- ment) (8) Rental per acre per annum (Interior Depart- ment) (9) Difference between bonus re- ceived or offered and filing fee (net gain to Government in revenue) (10) Arkansas____ Do______ Indiana_____ Michigan... Do______ Do______ Do______ Do:_____ Do______ Mississippi.. Do...... Do______ Do______ Do______ Do______ Do...... Do______ Do...... Do______ Do______ Do...... Do______ Do...... Do._____ Do______ Do...... Do______ Do______ Do...... Do...... Do______ Do______ Do______ Ozark________ _____do________ Hoosier______ Manistee_____ _____do________ .....do________ _____do________ Huron_______ -----do________ Homochitto.. _____do_______ De Soto______ Homochitto.. Bienville_____ _____do_______ _____do_______ _____do_______ Homochitto.. _____do_______ De Soto______ ____.do_______ Homochitto.. _____do_______ De Soto______ _____do_______ Homochitto.. .....do_______ _____do_______ -----do_______ _____do....... DeSoto_______ _____do........ -----do________ E. L. Latham_______________________ W. W. McClure.................... Sun Oil Co__________________________ Carter Oil Co_______________________ Central Development Co.1__________ C. L. Maguire, Inc__________________ William P. Shoemaker______________ Sohio Petroleum Co_________________ T. H. Welch________________________ Amerada Petroleum Co_____________ Atlantic Refining Co________________ Billy Bridewell_____________________ The California Co___________________ Carter Oil Co_______________________ _____do______________________________ Continental Oil Co.................. Devonian Oil Co____________________ Gulf Refining Co____________________ _____do,1...___________________________ Humble Oil & Refining Co__________ _____do______________________________ Caroline Hunt trust estate__________ Hassie Hunt trust estate____________ _____do______________________________ Hunt Oil Co________________________ H. L. Hunt_________________________ _____do______________________________ -----do______________________________ William Herbert Hunt trust estate.. Kirby Petroleum Co.1............... Magnolia Petroleum Co_____________ R. W. Milner, Jr____________________ Harry I. Morgan et al--------------- May June Aug. Apr. Oct. Sept. July Aug. July Nov. July Mar. May Apr. Mar. Mar. Feb. Dec. May May Feb. May Dec. June June July Dec. Dec. May Dec. Mar. June Oct. ,1944 \ 1945 ., 1944 i, 1942 !, 1943 , 1943 ., 1942 1944 1944 1942 :, 1944 , 1945 , 1945 ,1945 1,1945 , 1945 i, 1945 ;, 1944 i, 1945 i, 1944 i, 1945 i, 1945 1,1944 >, 1945 , 1945 , 1944 :, 1944 1944 1945 1944 1945 1945 1944 670 1,080. 78 160 119. 39 1,395 570 191 1,400 320 1,160 126. 64 240 425. 26 2, 530. 95 2,030. 61 2, 257. 32 932. 84 1, 274.04 732. 06 2, 498. 96 2, 559. 90 2,065. 53 1,338. 51 997. 21 1,028. 76 713. 83 1, 512. 69 1,458. 67 2,403. 75 420. 30 680.00 674. 22 2,562.54 $1,000. 00 1,081.00 840. 00 247. 20 1, 710. 00 75. 00 1,400.00 10. 00 3, 735. 20 886. 48 9,247.00 4,268. 33 27, 562. 59 41, 777. 67 23,156. 82 2,379.15 127, 424.00 15, 435. 60 30, 720. 00 300,000. 00 42, 370. 42 16, 750. 00 18,693. 51 8,250. 08 161,000. 00 31, 773. 00 23,344. 00 30,057. 00 7,600. 00 103, 360.00 71, 671. 81 2, 562. 54 (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) .(2 3) $10 14 10 10 18 10 10 18 10 16 10 10 10 32 26 30 12 16 10 32 32 26 18 14 14 10 20 20 32 10 10 10 32 (4) (4) (4) («) (4) (4) (4) <«) (4) (4) (4) (*) (4) (4) (4) (4) (4) (4) (4) (*) (4) (4) (4) (4) (4) (4) (4) (4) (4) (4) (4) (4) (4) $990. 00 1,067. 00 830. 00 237. 20 -18.00 1, 700. 00 65. 00 1,382. 00 3, 719. 20 876. 48 9,237.00 4, 258. 33 27,530. 59 41, 751. 67 23,126. 82 2, 367.15 127,408. 00 15, 425. 60 30,688. 00 299,968.00 42,344. 42 16, 732. 00 18,679. 51 8, 236. 08 160,990. 00 31, 753.00 23,324.00 30,025.00 7, 590. 00 103,350.00 71,661.81 2, 530. 54 See footnotes at end of table, p. cOIL AND GAS LEASES IN EFFECT ON LANDS ADMINISTERED BY THE FOREST SERVICE—Continued 63 O State (1) Forest (2) Lessee, bidder, or applicant (3) Effective date (4) Acreage 1 (5) Bonus paid or offered (6) Rental per acre per annum (7) Filing fee (Interior Depart- ment) (8) Rental per acre per annum (Interior Depart- ment) (9) Difference between bonus re- ceived or offered and filing fee (net gain to Government in revenue) (10) Mississippi_____ Do_________ Do_________ Do_________ Do_________ Do......... Do_________ Do_________ Do_________ Do_________ Do_________ Do_________ Do_________ Do_________ Do_________ Do.._...... Do_________ Do_________ Do_________ Do......... Do......... Ohio___________ Do......... Do.._...... Do......... Do_____.... West Virginia.. Total____ Bienville______ _____do...______ _____do_________ Homochitto-.. _____do_________ DeSoto________ _____do_________ Homochitto... _____do_________ _____do......... _____do_________ DeSoto________ Homochitto. __ De Soto_______ _____do________ _____do________ _____do__...... _____do________ Bienville...... De Soto_______ _____do_____... Wayne........ _____do________ .....do__...... .....do________ _____do________ Monongahela. Pan American Production Co.. _____do__________________________ _____do-------------------------- Placid Oil Co__________________ _____do__________________________ .. — do__________________________ Premier Oil Refining Co....... Stanolind Oil Co_______________ Pure Oil Co-------------------- Shell Oil Co., Inc.............. Stanolind Oil & Gas Co________ _____do__________________________ _____do__________________________ _____do.________________________ The Texas Co.................. _____do______i__________________ Tide Water Associated Oil Co.. _____do_________________________ E. A. Vaughey_________________ Woodley Petroleum Co........ .....do......................... W. F. Comstock............... Industrial Gas Corp............ _____do_________________________ _____do_________________________ _____do.1________________________ Ohio Oil Co.................... Feb. 8,1945 Apr. 21,1945 June 7,1945 May 15,1945 _____do________ June 21,1945 June 18,1945 Apr. 22,1944 _____do________ May 15,1945 Dec. 28,1944 Mar. 31,1945 Apr. 23,1945 June 19,1945 Apr. 10,1945 June 28,1945 Mar. 31,1945 June 18,1945 Mar. 31,1945 _____do_______ June 12,1945 June 23,1944 Nov. 28,1942 _____do_______ ____-do_______ Mar. 12,1943 Dec. 14,1944 1,234. 99 1,325. 36 2,372. 57 2, 531.94 2, 451.18 1,199. 20 640.00 269.68 347. 96 200. 66 271. 65 477. 75 472. 99 200 713.13 236. 06 280 951.86 2, 338. 98 758.88 904. 40 85. 76 564. 72 1, 992. 62 733. 56 40 1,129. 2 18,525. 00 49,833. 54 130, 491. 35 64, 564. 00 30,650.00 20, 813. 20 7,110. 40 1, 553. 36 4,320. 00 6,019. 80 '4, 664. 23 72,111.00 35, 526. 28 45, 240. 00 98, 616.43 29, 875. 75 57,000. 00 144, 334. 56 14, 642.14 22,845.90 12, 358. 00 100. 00 1,111.00 5, 555. 00 3, 333.00 (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) («) « (6) (fi) ($1) (1) (1) (1) 18, 509.00 49,815. 54 130, 461. 35 64, 532. 00 30,618. 00 20, 797. 20 7,100. 40 1, 543. 36 4, 310.00 6,009. 80 4, 654. 23 72,101. 00 35, 516. 28 45, 230. 00 98,606. 43 29,865. 75 56, 990. 00 144, 322. 56 14,612.14 22,835.90 12, 346. 00 90.00 -16.00 63, 255.86 1, 991, 582. 34 906 1,980, 677. 34 2 25 cents up. 4 50 cents first year; 25 cents each succeeding year except second and third years, for which no rental is charged; $1 in proven field or after discovery, theses.) (Exceptions shown in paren-OIL AND GAS LEASES TERMINATED Louisiana_____......... Do..._______________ Kisatchie_________ _____do..___________ Nelson Bunker Hunt trust estate______ Placid Oil Co . ________T______ Sept. 6,1943 do _ 3,174.82 273.74 82. 25 80 670. 98 959 $1,380.00 120.00 100. 00 613. 00 1,000.00 250.00 (5) (5) 1 1 1 1 $32 10 10 10 10 12 (0 («) (4) (4) (*) 0) $1,348.00 110.00 90.00 603.00 990.00 238.00 Michigan_______________ Do..________________ Mississippi______________ Ohio................... Total............. Huron____________ _____do_____________ Homochitto_______ Huron____________ Freeman Oil Co....................... Ohio Oil Co......................... Amerada Petroleum Co____________ E. E. Johnston........................ Sept. 29.1943 June 3,1942 July 28,1943 Mar. 26,1942 5,240. 79 3,463.00 84 3, 379.00 OIL AND GAS LEASES TERMINATED (Exceptions shown in 4 50 cents first year; 25 cents each succeeding year except second and third years, for which no rental is charged; $1 in proven field or after discovery, parentheses.) «Agreement to lease. „ PENDING APPLICATIONS OR BIDS FOR LEASES (Exceptions shown in Arkansas........ Do.......... Do.......... Florida__________ Do.......... Do..._______ Do__________ Do.......... Do__________ Do.......... Kentucky....... Louisiana_______ Do__________ New Mexico____ Do.......... Do__________ Do__________ Do.......... Do__________ North Carolina. Ohio____________ Do__________ Total....... Grand total. Ozark........ _____do........ _____do......... Apalachicola. -----do_________ -----do_________ -----do_________ -----do_________ _____do......... _____do____1____ Cumberland. Kisatchie____ _____do_________ Lincoln...... -----do......... -----do......... -----do--------- _____do_________ _____do__....... Croatan_______ Huron________ Wayne________ J. W. Bates 1.................. W. W. McClure 1................. A. R. Swann 1................... Marie Bower______.._______________ A. J. Coakley______________________ Margaret Dubose................. Mrs. A. R. Dupuis________________ Kathryn Gregory................. Inez Lefevre______________________ R. D. Tylander___________________ L. C. Young...................... Placid Oil Co_____________________ Nelson Bunker Hunt trust estate. W. J. Acree_______________________ Mrs. Willie Berry................. Mrs. Wilma Berry Conner________ Ruth Bigler Lytle_________________ R. S. Powell...................... Mrs. Virginia Sears_______________ Tide Water Petroleum Co________ Ohio Oil Co_______________________ Salt Creek Development Co...... 51 020 920 561* 560 394.40 558 545. 81 567. 50 381.80 529. 27 224. 07 440 800 640 320 360 280 560 170 534.86 36, 237. 71 104, 734. 36 $1,820. 00 51.00 1,020.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 15,171.42 7, 343.82 720. 00 900.00 320.00 160.00 265. 20 640.00 21, 700.00 25,860. 00 76,041.44 2,071,086. 78 (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3) (2 3). (2 3) (2 3) $1 (») $24 10 14 24 32 32 30 32 32 32 10 32 16 18 24 10 10 18 16 32 28 $1 $1, 796.00 41.00 1,006.00 -14.00 -22.00 -22.00 -20.00 -22.00 -22.00 -22.00 -10.00 15,139. 42 7,327. 82 702.00 876.00 310.00 150.00 247. 20 624.00 -32.00 21,672.00 49,705. 44 2,033, 761. 78 Q o 3 1 Acreage shown column 5 represents net Federal ownership; total acreage involved 107,629.74. Cases involving part interests. 3 25 cents for first lease-year, 50 cents for second, 75 cents for third, and $1 for fourth and each subsequent lease-year. $1 per acre if located in proven field or from date of discovery. 5 Proven field—would have been advertised under Interior Department policy also.32 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN A BILL To promote the mining of minerals on lands acquired by the United States Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That all mineral deposits belonging to the United States, exclusive of mineral deposits in lands set apart for military or naval uses or for national park or monument uses, which are situated in lands, including lands in Alaska, heretofore or hereafter acquired or administered under the Act of March 1, 1911 (36 Stat. 961), as amended, title II of the National Industrial Recovery Act, approved June 16, 1933 (48 Stat. 200; 40 U. S. C., sees. 401-410), the Emergency Appropriation Act, fiscal year 1935, approved June 19, 1934 (48 Stat. 1055), the Emergency Relief Appropriation Act of 1935, approved April 8, 1935 (49 Stat. 115), section 55 of title I of the Act of August 24, 1935 (49 Stat. 750, 781), the Emergency Relief Appropriation Act of 1936, approved June 22, 1936 (49 Stat. 1608^, the Emergency Relief Appropriation Act of 1937, approved June 29, 1937 (50 Stat. 352), the Bankhead-Jones Farm Tenant Act, approved July 22, 1937 (50 Stat. 522; 7 U. S. C., sees. 1000-1029), the Emergency Relief Appropriation Act of 1938, approved June 21, 1938 (52 Stat. 809), the provisions for "Water conservation and utilit}r projects" in the Interior Department Appropri- ation Act, 1940, approved May 10, 1939 (53 Stat. 685, 719), the Emergency Re- lief Appropriation Act of 1939, approved June 30, 1939 (53 Stat. 927), the Emer- gency Relief Appropriation Act, fiscal year 1941, approved June .26, 1940 (54 Stat. 611), the Act of October 14, 1940 (54 Stat. 1119; 16 U. S. C., sees. 590y to 590z-10), the Act of June 25, 1941 (ch. 251, 55 Stat. 263), the provisions for "Loans, grants, and rural rehabilitation" in the Department of Agriculture Appro- priation Act, 1942, approved July 1, 1941 (55 Stat. 408, 440), the Act of Decem- ber 23, 1941 (55 Stat. 857), or the provisions for "Loans, grants, and rural rehabili- tation" in the Department of Agriculture Appropriation Act, 1943, approved July 22, 1942 (56 Stat. 664, 696), together with all Acts heretofore or hereafter enacted which are amendatory of or supplementary to any of the foregoing Acts, shall be subject to disposal, under the jurisdiction of the Secretary of the Interior (herein- after called the "Secretary"), in accordance with the provisions of this Act: Pro- vided, however, That no mineral deposit covered by this section shall be leased or otherwise disposed of except with the consent of the head of the executive depart- ment, independent establishment, or instrumentality having jurisdiction over the lands containing such deposit, or holding a mortgage or deed of trust secured by such lands which is unsatisfied of record, and subject to such conditions as that official may prescribe to insure the adequate utilization of the lands for the pri- mary purposes for which they have been acquired or «are being administered: And provided further, That minerals in lands set apart for Indian use, including lands the jurisdiction over which has been transferred to the Department of the Interior by Executive order for Indian use, shall be subject to the Act entitled "An Act to regulate the leasing of certain Indian lands for mining purposes," approved May 11, 1938 (52 Stat. 347; 25 U. S. C., sees. 396a-396f). Sec. 2. The mineral deposits covered by section 1 shall not be subject to dis- posal other than as provided in this Act, except that a conveyance of lands not leased for mineral purposes may be made by the agency having jurisdiction there- over without a reservation of the mineral rights, provided it is determined by such agency, after full consideration of information obtained from the Department of the Interior as to whether the lands are known or believed to contain valuable mineral deposits, that such lands are more valuable for surface use than for mineral use. Any other conveyance by the United States of any of the lands containing mineral deposits covered by section 1 shall be made subject to a reserva- tion to the United States of such deposits, together with the right to enter upon, mine, and remove them. Sec. 3. As used in this Act, the term "mineral leasing laws" shall mean the Act of October 20, 1914 (38 Stat. 741), the Act of February 25, 1920 (41 Stat. 437), the Act of April 17, 1926 (44 Stat. 301), the Act of February 7, 1927 (44 Stat. 1057), and laws amendatory thereof or supplementary thereto. Sec. 4. All deposits of coal, phosphate, oil, oil shale, gas, sodium, potassium, and sulfur which are owned by the United States and which are within the lands affected by this Act may be leased by the Secretary under the leasing provisions of the mineral leasing laws, subject to the provisions of section 1 hereof. The provisions of the Act of April 17, 1926 (44 Stat. 301), as amended, shall apply to deposits of sulfur covered by this Act wherever situated. Sec. 5. With the exception of deposits of the minerals named in section 4, all mineral deposits which are owned by the United States and which are within the lands affected by this Act may be leased by the Secretary under the provisionsDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 33 of sections 6 to 10, inclusive, of this Act, subject to the provisions of section 1 hereof. The provisions of sections 6 to 10, inclusive, shall apply only to the mineral deposits covered by this section, except that the acreage provisions of section 6 shall extend also to the deposits covered by section 4 of this Act. Sec. 6. Leases for mineral deposits which are known or believed to be capable of commercial production, as determined by the Secretary, may be issued only through competitive bidding at public auction or by sealed bids to the responsible qualified bidder of the highest bonus in the form prescribed by the Secretary. Such deposits shall be offered for bidding in units of not to exceed six hundred and forty acres except that where, in the opinion of the Secretary, the inclusion of a larger area would promote the economic development of isolated tracts, or would otherwise be in the best interests of the United States, such deposits may be offered for bidding in units of not to exceed two thousand five hundred and sixty acres. Any such lease offer shall reserve to the Secretary the right to reject any or all bids whenever, in his judgment, the interests of the United States so require. Leases for lands which require prospecting to determine whether they contain commercially valuable mineral deposits may be issued with or without competitive bidding in units of not to exceed two thousand five hundred and sixty acres. All leases shall be issued upon such terms and conditions, consistent with the provisions of this Act, as are determined by the Secretary to be in the best interests of the United States. Leases may provide for resort to appropriate methods for the settlement or compromise of disputes or debts thereunder by the Secretary or otherwise, and for remedies for breach of specified conditions thereof. The acreage covered by a lease shall be in a reasonably compact form. Sec. 7. Leases shall be issued only to citizens of the United States, associations of such citizens, or corporations organized under the laws of the United States or of any State or Territory thereof. Citizens, associations, and corporations of a foreign country, the laws, customs, or regulations of which do not accord similar or like privileges to citizens, associations, or corporations of this country, shall not by stock ownership, stock holding, stock control, or other direct or indirect means, own or control any interest in a lease. No person, association, or corporation shall take or hold at any one time leases for deposits of any one mineral in any one State or Territory underlying more than seven thousand six hundred eighty acres in the aggregate. No person, association, or corporation shall take or hold at any on$ time any interest as a member of an association or as a stockholder of a corporation holding a lease, which, together with the area embraced in anj^ direct holding of a lease, or which, together with any other interest as a member of an association or as a stockholder of a corpora- tion holding a lease, exceeds in the aggregate seven thousand six hundred eighty acres for any one mineral in any one State or Territory. .The Secretary may prescribe a lower maximum acreage for any specific mineral in any area, or for the country as a whole, if he shall find that such action is required to conserve resources or to prevent monopoly or otherwise to protect the public interests. Any ownership or interest forbidden in this section which may be acquired by descent, will, judgment, or decree may be held for two years and not longer after its acquisition. If an interest in any lease is owned or controlled in violation of this secti&n, the lease may be canceled, or the person, association, or corporation so owning or controlling the interest may be compelled to dispose of the interest, in an appro- priate proceeding instituted by the Attorney General. Such a proceeding shall be instituted in the United States district court for the district in which the leased property or some part thereof is located or in which the lease owner may be found. Sec. 8. Each lease shall be issued for a period of ten years with a preferential right in the lessee to renew the same before its expiration for successive periods of ten years, upon such reasonable terms and conditions as may be prescribed by the Secretary, unless otherwise provided by law at the time of the expiration of such lease or renewal. The Secretary may permit suspension of operations in whole or in part under any lease, and the payment of rental may be waived in whole or in part during such period of suspension. The amount of work to be done or investment required during each year of the lease shall be prescribed in the lease or in the regulations promulgated under this Act. Each lease shall be conditioned (1) upon the payment of a royalty of not less than 5 per centum of the value of the mineral products at the point of shipment to market, or (2) upon the payment of a royalty of not less than 5 per centum of the net returns from the processing plant or smelter or mint if the mineral sub-34 DEVELOPMENT OP OIL AND GAS ON THE PUBLIC DOMAIN stances are shipped as ore for processing or as concentrates for smelting or as bullion for minting. Such royalties shall be due and payable quarterly. The Secretary may elect to take payments of royalties in kind. Each lease shall also be conditioned upon the payment of a rental for each calendar year, or portion thereof, during the continuance of the lease, at a rate of not less than 25 cents per acre per annum. Such rental shall be due and pay- able annually in advance. The rental paid on a lease for any year shall be credited against the royalty as it accrues for that year. Sec. 9. Each lease shall contain provisions requiring the exercise of reasonable diligence,-skill, and care in the operation of the leased property; requiring the observance of such rules for the safety and welfare of miners and for the prevention of undue waste as may be prescribed by the Secretary; prohibiting a workday in excess of eight hours in any one day for underground workers except in cases of emergency; prohibiting the employment of any boy under the age of sixteen or the employment of any girl or woman, without regard to age, in any mine below the surface; securing to the workmen complete freedom of purchase; and requiring the payment of wages at least twice a month in lawful money of the United States or in negotiable checks on banks, of even date with the pay day, payable without discount and on demand in lawful money of the United States. Each lease shall also contain such conditions as the agency having jurisdiction over the lands shall prescribe to insure the adequate utilization of the lands for the primary purposes for which they have been acquired or are being administered and such other provisions as the Secretary may deem necessary to insure the sale of the products of the leased property to the United States and to the public at reasonable prices, to protect the interests of the United States, to prevent monopoly, and to safe- guard the public welfare. Sec. 10. No lease shall be assigned or sublet except with the consent of the Secretary. Upon such terms and conditions as he may prescribe, the Secretary may permit a lease owner to make a written relinquishment at any time of all rights under a lease. Upon the acceptance of such a relinquishment, the lease owner shall be relieved of all future obligations under the lease as of the date fixed by the Secretary. With the consent of the Secretary, a lease owner may surrender any part of the area included within a lease. The Secretary may pro- vide for the refund or collection of rentals on a pro rata monthly basis for the period of the year prior to the filing of a relinquishment or surrender. Sec. 11. Any lease issued pursuant to section 4 or section 5 of this Act under which commercial production has not been obtained may be canceled by the Secretary upon a determination by him or upon a certification by the agency having jurisdiction over the leased lands that the lease owner has failed to comply with any of the provisions of this Act, of the lease, or of the regulations promul- gated under this Act and in force at the date of the lease or any renewal thereof. Before the lease is canceled, the Secretary shall give the lease owner notice to show cause withing a reasonable time, not less than thirty days, why the lease should not be canceled. Such notice in advance of cancellation shall be sent the lease owner by registered letter directed to the lease owner's record post-office address. In case such letter shall be returned as undelivered, such notice shall also be posted for a reasonable period, not less than thirty days, specified by the S^jretary, in the United States land office for the district in which the land covered by such lease is situated, or in the event that there is no such office in the State or Territory in which the leased land is situated, then in the post office nearest such land. Any lease issued pursuant to section 4 or section 5 of this Act under which commercial production has been obtained may be canceled in an appropriate proceeding instituted by the Attorney General upon a determinatin by the court that the lease owner has failed to comply with any of the provisions of this Act, of the lease, .or of the regulations promulgated under this Act and in force at the date of the lease or any renewal thereof. Such a proceeding shall be instituted in the United States district court for the district in which the leased property or some part thereof is located or in which the lease owner may be found. Sec. 12. Under section 4 or section 5 ol this Act the Secretary may issue separate leases for the concurrent development of deposits of -different minerals underlying the same lands, but where several minerals occur in association or conjunction, whether in the same vein or stratum or otherwise, the holder of a lease covering any one or more of such minerals may be granted the right to mine any or all of the minerals so associated or conjoined, upon terms and conditions consistent with the provisions of this Act. Under section 4 or section 5 of this Act the SecretaryDEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN 35 may also issue leases for the development of fractional or future interests belonging to the United States in mineral deposits without regard to the minimum rental requirements prescribed or made applicable by this Act, or may enter into agree- ments with the owners of other interests in the same property for the develop^ ment of such deposits upon those terms and conditions which he may deem appropriate. Sec. 13. The Secretary may grant, either with or without competitive bidding, temporary use permits for the mining and removal of deposits of limestone, com- mon stone, rock, sand, gravel, clay, and other materials for construction or agri- cultural uses which are owned by the United States and which are within the lands, affected by this Act, subject to the provisions of section 1 hereof. No person, association, or corporation who is not qualified to take or hold a lease under sec- tion 4 or section 5 of this Act shall be eligible to take or hold a temporary use permit under this section except as hereinafter provided. Such permits shall be for a period of not exceeding one year and for an area of not exceeding six hundred and forty acres in a reasonably compact form; shall be conditioned upon the pay- ment of a royalty of not less than 5 per centum of the value of the limestone, common stone, rock, sand, gravel, clay, or other materials removed and upon the payment of a rental in advance, to be credited against the royalty, at a rate of not less than 25 cents per acre per annum; shall be subject to such conditions as. the agency having jurisdiction over the lands shall prescribe to insure the adequate utilization of the lands for the primary purposes for which they have been acquired or are being administered, and to such other terms and conditions as are deter- mined by the Secretary to be in the best interests of the United States; and shall be subject to revocation by the Secretary after thirty days' notice upon failure of the permittee to comply with any of the provisions of this Act, of the permit, or of the regulations promulgated under this Act: Provided, however, That the Secre- tary or his representative may, in his discretion, permit, with or without charge and upon such terms and conditions as he may deem to be in the public interest, the mining and removal of the deposits described in this section if the materials re- moved are to be used in connection with mining operations carried on under the authority of this Act: And provided further, That the head of any agency or his representative, having jurisdiction over the surface of the lands containing mineral deposits covered by this section or holding a mortgage or deed of trust secured by such lands which is unsatisfied of record, may in his discretion permit, with or without charge and upon such terms and conditions as he may deem to be in the public interest, the mining and removal of the deposits described in this section if the materials removed are to be used for construction, repair, operation, or maintenance in connection with any public project or reservation, or for roads or streets within or in the vicinity of any such project or reservation, or if such ma- terials are to be used by any resident within the project or reservation or in the vicinity thereof for agricultural purposes or in the construction, repair, operation, or maintenance of improvements upon lands owned or occupied by such residents. The qualifications for taking or holding a lease under section 4 or section 5 of this. Act shall not apply to permits issued under this proviso. The term "mineral deposits" as used in the other sections of this Act shall be construed to include the deposits described in this section. Sec. 14. No lease or permit issued under this Act shall confer any right to occupy, use, or impair the surface of any of the lands affected by this Act, or to. remove, use, or injure any of the natural products thereof, except to the extent to which such right is expressly granted by the terms of such lease or permit, and no lessee or permittee shall exercise any surface right so granted for any purpose not reasonably incidental to the extraction, beneficiation, or disposition of the mineral deposits covered by his lease or permit. The Secretary may grant to any lessee or permittee under this Act such rights with respect to the occupancy^ use, or impairment of the surface of the lands affected by this Act as he may deem necessary to facilitate the orderly and economic extraction, beneficiation, or disposition of the mineral deposits covered by this Act, subject to the provisions of section 1 hereof. All leases and permits issued under this Act shall reserve to the United States, (a) the right to grant such rights-of-way or easements (including easements in tunnels) upon, in, or through the lands covered by the lease or permit, for joint or several use, as may be appropriate to the working of such lands or of other lands containing mineral deposits subject to disposal under this Act or the mineral leasing laws, or to the treatment and shipment of the products of such lands by or under the authority of the United States, its lessees or permittees, or as may*36 DEVELOPMENT OF OIL AND GAS ON THE PUBLIC DOMAIN be needed for other public purposes; (b) the right to use, lease, sell, or otherwise dispose of, under existing laws or laws thereafter enacted, any mineral deposits or other substances whatsoever in the lands covered by the lease or permit other than those mineral deposits expressly included in the lease or permit; and (c) the right to use, lease, sell, or otherwise dispose of, under existing laws or laws there- after enacted, the surface of the lands covered by the lease or permit, together with the natural products thereof, insofar as consistent with any surface rights granted the holder of the lease or permit under this Act. The Secretary may exercise the rights reserved to the United States by clauses (a) and (b) of this paragraph, subject to the provisions of section 1 hereof. The head of the exec- utive department, independent establishment, or instrumentality having juris- diction over the surface of the lands involved may exercise the rights reserved to the United States by clause (c) of this paragraph. Sec. 15. The Secretary is authorized to prescribe such rules and regulations as are appropriate to the effectuation of the purposes of this Act, and to do any and all things necessary to carry out and accomplish the purposes of this Act. The Secretary may delegate to officers and employees of the Department of the Interior any of the powers vested in, or the functions to be performed by, the Secretary under this Act. All statements, representations, or reports required by the Secretary under this Act shall be upon oath, unless otherwise specified by him, and shall be in such form as the Secretary may require. Sec. 16. All receipts derived from leases or permits issued under the authority of this Act shall be paid into the same funds or accounts in the Treasury and shall be distributed in the same manner as prescribed for other receipts from the lands affected by the lease or permit, the intention of this provision being that this act shall not affect the distribution of receipts pursuant to legislation applicable to such lands: Provided, however, That receipts from leases or permits for minerals in lands set apart for Indian use, including lands the jurisdiction over which has been transferred to the Department of the Interior by Executive order for Indian use, shall be disposed of in accordance with the provisions of the Act of May 17, 1926 (44 Stat. 560; 25 U. S. C., sec. 155). Sec. 17. Within three years after the date of the approval of this Act the heads of all executive departments, independent establishments, or instrumental- ities having jurisdiction over any of the lands referred to in section 1 of this Act shall furnish to the Secretary the legal description of all such lands, and within that time, or within any extension thereof deemed requisite by the head of the agency concerned, with the concurrence of the Secretary, shall furnish to him all pertinent abstracts, title papers, and other documents in the possession of such agencies concerning the status of the- title of the United States to the mineral deposits that may be found in such lands: Provided, however, That prior to the expiration of such period of three years, or any extension thereof, any of the foregoing documents which are necessary to the disposition of any application for a lease or permit filed under the provisions of this Act, or to the disposition of any other matter requiring immediate consideration presented under the pro- visions of this Act, and which have not been previously furnished in accordance with this section shall be furnished to the Secretary as promptly as possible after the receipt of a request for such documents from him. Abstracts, title papers, and other documents furnished to the Secretary under this section shall be recorded promptly in the General Land Office in such form as the Secretary shall deem adequate for their preservation and use in the adminis- tration of this Act, whereupon the originals shall be returned promptly to the agency from which they were received. Duly authenticated copies of any such abstracts, title papers, or other documents may, however, be furnished to the Secretary, in lieu of the originals, in the discretion of the agency concerned. Sec. 18. Nothing contained in this Act shall be construed to affect the rights of the State or other local authorities to exercise any right which they may have with' respect to properties covered by leases or permits issued under this Act, including the right to levy and collect taxes upon improvements, output of mines, or other rights, property, or assets of any lessee or permittee of the United States. oThis book is a preservation facsimile produced for the University of Illinois, Urbana-Champaign. It is made in compliance with copyright law and produced on acid-free archival 60# book weight paper which meets the requirements of ANSI/NISO Z39.48-1992 (permanence of paper). Preservation facsimile printing and binding by Northern Micrographics Brookhaven Bindery La Crosse, Wisconsin 2017