MIDWAY SCHOOL DISTRICT,

Fellows, Calif.

At a special meeting of the board of trustees of the Midway School District held on September 20, 1933, it was regularly voted to favor a resolution protecting our taxable rights in the Midway District. The resolution follows:

RESOLUTION

Relative to memoralizing and petitioning Congress to enact legislation transferring naval petroleum reserve no. 2 in Kern County, Calif., from the jurisdiction of the Navy Department to the jurisdiction of the Department of the Interior. Whereas a portion of the Midway School District lies within a portion of naval petroleum reserve no. 2 and the taxes collected on personal property on oil lands within said reserve leased from the Federal Government constitute a material portion of the annual revenues of this school district; and

Whereas the Secretary of the Navy has publicly stated that the Navy Department desires to terminate the leases on the said reserve, thereby removing the property from the tax rolls of this district; and

Whereas naval petroleum reserve no. 2 is not and cannot constitue a reserve of future oil because the Government lands within said reserve are subject to drainage by the operation of the privately owned lands which comprise twothirds of said reserve; and

Whereas naval petroleum reserves no. 1 and no. 3 and no. 4 constitute adequate protection for a future supply of oil for the Navy; and

Whereas the operators of the leased lands within naval petroleum reserve no. 2 have faithfully supported the proration of production in accordance with voluntary and legal curtailment orders, which support is essential to the welfare of the oil industry and the thousands of oil workers of this district: Now, therefore, be it

Resolved by the Board of Trustees of the Midway School District at Fellows, Kern County, Calif., That we hereby memoralize and petition Congress to enact legislation restoring the public lands within the external boundaries of naval petroleum reserve no. 2 as now constituted, to the public domain of the United States, and transferring the jurisdiction over and the administration thereof and of all leases thereof, to the Secretary of the Interior, and revoking and repealing any and all Executive orders and acts of Congress creating or confirming the creating of said naval petroleum reserve no. 2; and be it further

Resolved, That a copy of this resolution be sent to the President of the United States, to United States Senator Hiram W. Johnson, to United States Senator William G. McAdoo, to Representative Henry E. Stubbs, to Governor James Rolph, Jr., to State Senator James I. Wagy, to Assemblyman Rodney L. Turner and the Board of Supervisors of Kern County, Calif.

Resolution relative to memorializing and petitioning Congress to enact legislation transferring naval petroleum reserve no. 2 in Kern County, Calif., from the jurisdiction of the Navy Department to the Department of the Interior.

Whereas the Navy Department has stated that they propose to terminate the leases within naval petroleum reserve no. 2; and

Whereas all leases from owners of privately owned lands in this vicinity are for the duration of production; and

Whereas the termination of said leases would decrease the tax revenues of this county $200,000 a year without decreasing the cost of local government; and Whereas naval petroleum reserves were created for the purpose of providing a reserve of oil for the future use of our Navy; and

Whereas naval petroleum reserve no. 2 comprises 30,181 acres, of which 20,115 acres are privately owned lands, and the 9,546 acres of Government lands which are leased under 26 leases to 10 lessees are so distributed amongst the 20,115 acres of patented lands that all of the Navy lands are subject to drainage, thereby making it impossible for said Navy lands to provide a reserve of oil for future use of the Navy; and

Whereas this community and the State of California and the Bureau of Reclamation have been deprived of participating in the distribution of at least

$25,000,000 of the roylties, bonuses, and rentals received by the Federal Government from naval petroleum reserves adjacent to this community because all of such receipts are covered into the Treasury of the United States; and

Whereas the receipts from royalties, bonuses, and rentals from oil leases on public lands under the jurisdiction of the Department of the Interior are distributed 371⁄2 percent 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 or maintenance of public roads or for the support of public schools, and 521⁄2 percent are paid into, reserved, and appropriated as a part of the reclamation fund; and

Whereas this community and the county of Kern have already suffered a loss of $334,756.15 due to the cancelation of leases within naval petroleum reserve no. 1 and the cost of maintaining the roads from schools have not been reduced; and

Whereas the type of oil produced from naval petroleum reserve no. 2 is refinable crude and is of no benefit to the Navy except for purposes of sale; and

Whereas there are other adequate naval petroleum reserves and naval oil shale reserves which are not subject to drainage: Now, therefore, be it

Resolved, by the Taft Chamber of Commerce, That we hereby petition Congress to enact legislation restoring the public lands within naval petroleum reserve no. 2, to the public domain of the United States, and transferring the jurisdiction over and the administration thereof and of all leases thereon, to the Secretary of the Interior, and revoking and repealing any and all Executive orders and acts of Congress creating or confirming the creating of naval petroleum reserve no. 2; and be it further

Resolved, That a copy of this resolution be transmitted to the board of supervisors of Kern County; Hon. James Rolph, Jr., Governor of California; Hon. Hiram W. Johnson, and Hon. William Gibbs McAdoo, United States Senators; and Hon. Henry E. Stubbs, Member of Congress, urging their support and assistance.

H. G. ARNDT, Secretary.

The State of California, the county of Kern, and the taxing units of government are interested in the orderly production of this natural resource in such a manner that it is recovered and utilized in the most efficient manner possible. Through wasteful methods of recovery and utilization the Government has lost millions of dollars of revenue because wasted products are not susceptible of taxation.

Short-term leases seriously aggravate the conditions under which proration of production may be effected. Lessees of property upon which the leases are about to expire should not be expected to enter into agreements to curtail their production upon the same terms as the operator who owns the land or has a lease for the life of production. Again I repeat that it is very difficult to appraise and assess the value of properties on which the investments have been millions of dollars when located on land leased for a comparatively short term.

The States where Federal lands are producing oil royalties and the taxing units of goverenment where these lands are located have in a sense equities in the production. The States in which the lands are located receive 371⁄2 percent of the royalties and the Bureau of Reclamation, which receives 521⁄2 percent of the royalties, expends its funds in all of the so-called “public-land" States.

The California Legislature at its 1931 session adopted a joint resolution of which I was the author, which is as follows:

ASSEMBLY JOINT RESOLUTION No. 17

(By Mr. Patterson)

CHAPTER 96

Assembly Joint Resolution No. 17, relative to memorializing and petitioning Congress to enact legislation transferring certain oil lands in Kern County, Calif., from the jurisdiction of the Navy Department to the jurisdiction of the Department of the Interior. (Filed with Secretary of State May 15, 1931.)

Whereas, on September 27, 1909, by Presidential Executive order of that date, certain lands in Kern County, Calif., were withdrawn from entry and, by Presidential Executive order of September 2, 1912, naval petroleum reserve no. 2 was created therefrom embracing originally 31,181 acres of which 19,620 acres were or have been patented to private parties and 9,991 acres have been leased to private

parties for operation and are being operated under the provisions of the general leasing act of February 25, 1920 (c. 85, 41 stats. 450), and 570 acres remain unleased; and

Whereas section 35 of the said general leasing act provides that 371⁄2 percent of all amounts derived by the Federal Government from bonuses, royalties, and rentals on leased oil or gas lands or deposits within the public domain shall be paid, at stated intervals by the Secretary of the Treasury to the State within the boundaries of which such leased lands or deposits are located, for the use by said State, or the subdivisions thereof, for the construction and maintenance of public roads or for the support of public schools or other public educational institutions, and that all moneys accruing to the Federal Government from bonuses, royalties and rentals from naval petroleum reserve lands shall be deposited in the United States treasury as "miscellaneous receipts"; and

"Whereas neither the State of California, nor Kern County, Calif., nor the Navy Department of the United States, receives any benefit from or part of the amounts derived by the Federal Government from bonuses, royalties, or rentals on said lands within said naval petroleum reserve no. 2: Now, therefore, be it Resolved by the Assembly and the Senate of the State of California, jointly, That the Legislature of the State of California earnestly memoralizes and petitions congress to enact legislation transferring the aforesaid lands now within naval petroleum reserve no. 2 from the jurisdiction of the Navy Department to the public domain under the jurisdiction of the Department of the Interior; and, be it further

Resolved, That a copy of this joint resolution be transmitted to the President of the United States, to the Vice President of the United States, and to each member of the Senate and the House of Representatives of the United States.

Your colleague and member of the Committee on Interstate and Foreign Commerce, Hon. Clarence F. Lea, who is dean of the California delegation in the House, forwarded a copy of this resolution to the Secretary of the Navy and requested his comments as to the attitude of the Navy Department to the proposal. The memorandum received by Congressman Lea was transmitted to me and statements in the memorandum indicating the intent not to renew the leases have caused us considerable alarm in California.

The State of California will be deprived of considerable revenue from income taxes earned by companies operating in naval petroleum reserve no. 2 if the leases are terminated and the local units of government will be deprived of more than $200,000 a year in tax revenues without any appreciable reduction in the cost of local governmental functions.

The Navy Department, by their actions and by the very fact of the broad powers given to them under the acts of June 4, 1920, and February 25, 1928, are enabled to enter into the oil business, when as a matter of fact, the products from the lands are of no use to the Navy Department except for purpose of sale. There already has been an appropriation made to the Navy Department of $10,000,000, which fund is to be used for drilling and operating on naval-petroleum reserves. The policy of the Federal Government in engaging in a private business is a matter of serious consequence to the oil industry and to our principles of government.

All of the now proven productive oil lands within naval-petroleum reserve no. 2 was either privately owned or had been claimed and occupied prior to any withdrawal order. It is contended that the same law and that the same justice should be accorded to them as to the citizens who acquired leases outside of the reserves. The leases are identical and there is no more legal way in which their leases can be terminated, or that they can be prohibited from producing from deeper sands, than can the leases on other Government lands be terminated.

The question at point is: Shall the producers within naval-petroleum reserve no. 2 who are operating leases through vested rights acquired prior to any withdrawal order be treated differently from operators located on other public lands under similar leases simply because years after their claims were initiated, their particular properties were declared by Executive order to be within navalpetroleum reserve no. 2.

California, with its 1,200 miles of shore line, fully appreciates the necessity of an adequate Navy with adequate naval petroleum reserves. We would not suggest anything that would impair our protection.

It is estimated that 14 million people out of our 6 million population in California are dependent upon the welfare of the oil industry, either as investors or employees, or merchants or professional men who depend upon the welfare of the employees of this great industry. Whole communities in California are engaged

exclusively in the production of oil or supplying the materials for that industry. The cities of Maricopa, Taft, McKittrick, Lost Hills, Avenal, and Coalinga are exclusively dependent upon the oil industry for their existence.

Beginning in 1928, the oil companies told their superintendents that it was necessary for them to take 2 months' vacation without pay in order for all of them to be maintained on the pay roll. In 1929, the oil industry went onto a 6-day week. The employees who had been receiving $6 a day, for a 7-day week, or $42 a week, were put on a 6-day basis at $7 a day, receiving $42 a week. From that time on through these trying years of the depression the oil industry has staggered its employment so that today practically every person who is an oil worker, is still upon the pay roll. In most of the industry the employees are now working 4 days on and 3 days off. If all industries had staggered their employment as the oil industry has in California, there would be comparatively few people upon the relief rolls today.

The two things in which we are vitally interested in connection with this bill on behalf of the State of California are the proper distribution of the revenues from the public domain, and the extension of the leases to the life of production. I earnestly urge the committee to provide for these two problems in House bill 5530.

The CHAIRMAN. I have a list of witnesses here, but I am not familiar with the order in which they should appear. If Mr. Tallman and Mr. Bell, of Oklahoma, are present, we will be glad to hear their statements.

Mr. TALLMAN. If agreeable to the committee, Mr. Chairman, I understand that Mr. Jackson wishes to precede me.

The CHAIRMAN. If Mr. Jackson is present, we will be glad to hear him at this time.

STATEMENT OF ROBERT P. JACKSON, GREAT FALLS, MONT., REPRESENTING THE OIL CONSERVATION BOARD OF THE STATE OF MONTANA, AND OTHER ORGANIZATIONS

The CHAIRMAN. May I ask you to be as brief as possible, Mr. Jackson? We will be a long time on this bill, and I am requested by the leadership of the House to rush our bills through. Please file as much of your statements in the form of briefs as possible. That request applies to everybody who is to appear. Please do not, however, misunderstand me. I do not wish you to gain the impression that I am trying to keep anyone from testifying. On the contrary, I want to be as fair and liberal as I possibly can in affording full opportunity to everybody who desires to appear, and I promise you I will do that.

Mr. JACKSON. My name, Mr. Chairman, is Robert P. Jackson; I reside at Great Falls, Mont., and have resided there for 29 years. I am secretary of the Oil Conservation Board of the State of Montana, and I am an attorney in the public-land practice, in which business I have been engaged for something over 20 years. I am a member of the Independent Petroleum Association of America, and represent the Montana chapter of that association; I also represent the Montana Petroleum Industries Committee, having headquarters at Great Falls, Mont., and I will present my credentials as representing that committee. I also appear by request representing the Rocky Mountain Oil & Gas Association, Wyoming chapter, having headquarters at Casper, Wyo., and I will present my credentials from that organization.

I will be as brief as possible in presenting this matter, and if I seem to trespass on your time I hope you gentlemen will take into

consideration the fact that I feel a great responsibility on account of the number of individuals and companies that I am here to represent. If I could have persuaded a number of them to come, it would have required a great deal more time for each one to be heard than if all of them were to be heard by one representative.

I think, since there seems to be a little difference between the views of the oil conservation board members, speaking from the standpoint of the State agency, and the views of some of the oil men's associations and individual companies, that I should divide my remarks to some extent by speaking first from the oil conservation board's angle of the matter, and then covering some other points in which they are not particularly interested as a State agency. The oil conservation board is an institution that I think is unique among State agencies in the United States. It was created in December or January 1934 as a State organization, the members being appointed by the governor for the purpose of acting as a contact and representative agency for the Federal Code Authority; and, also, for the State, in its governmental capacity, in an effort to control and regulate oil production on the lands of the State, irrespective of the ownership-that is, whether State lands, privately owned lands, or Federal lands. That organization is composed of five men. The law provides that four of them shall be active members of the oil industry in the State of Montana and residents of the State for more than 1 year. One member was to be appointed by the Governor as the representative of the State. It is now composed of two members engaged primarily in oil and gas exploration and development, one in the refining industry, ane one official of one of the major companies, and the assistant attorney general of the State is the State's representative. The members of that board are, naturally, very much concerned about any Federal legislation affecting oil and gas lands, operating rights, and so forth, in the State of Montana, owing to the fact that the Federal Government is by far the largest holder or owner of the oil and gas lands in the State of Montana. I do not have the exact figures on that, but I think there will be no dispute of the fact that the Federal Government holds several million acres of potential oiland gas-producing lands in the State of Montana. A great deal of that land is covered by prospecting permits issued by the Secretary of the Interior. The leasing of Federal land in the State has not progressed to any great extent. I think that at this time there are in force in Montana something like 30 producing Federal oil and gas leases; but, on account of the vast number of permits in a more or less state of suspense, as they have been for years, the effect of any policy concerning those lands is bound to be felt by all concerned with the oil and gas lands in the State.

The members of the oil conservation board were rather surprised by the terms of House bill 5530, introduced by Representative Greever. They gave it careful study from the standpoint of its practical application and results, and also from its legal angle. They have set out their views on it very briefly, and I think I can save the time of the committee by reading a part of their communication and then filing it with the committee. Then I can confine my remarks to the