Mrs. GREENWAY. Mr. Chairman, may I ask Mr. Poole a question? The CHAIRMAN. Mrs. Greenway.

Mrs. GREENWAY. Mr. Poole, you said that the Interior Department had given notice that there might be a change in policy as between permits and leases. Is this bill to create the ability to make any change of policy?

Mr. POOLE. There is contemplated such a change.

Mrs. GREENWAY. You could not change the policy without this bill? Mr. POOLE. I am not prepared to answer that question, Mrs. Greenway.

Mrs. GREENWAY. I am just trying to get the purpose of this bill. Mr. POOLE. I should probably emphasize that the issuing of permits or extensions is a matter of discretion. Those provisions of the law have so been held by the courts, that it is addressed to the discretion of the Secretary of the Interior.

Mr. MOTT. Now, let me ask whether the rule, the new rule that was made 9 months ago, terminating permits on May 1, 1935, was made in contemplation of this legislation, H. R. 5530?

Mr. POOLE. I think not.

Mr. MOTT. Was it made in contemplation of any legislation to be proposed?

Mr. POOLE. I am not prepared to answer that question, Congressman. I do not know what the motives were behind the people that formulated that policy.

Mr. MOTT. What I am thinking of is this: Whether it was or it was not; and if it was not, then this bill would not be necessary in order to enable the Secretary of the Interior to put into effect the new policy, would it?

Mr. POOLE. It is very likely true, under the existing law, when the Secretary of the Interior does have the authority to change the policy, because there are discretionary provisions in the oil and gas lease law which permitted him to do that.

I want to make a further statement in answer to Congressman Ayers' question.

Mr. AYERS. Let me restate that question, Mr. Solicitor.

The CHAIRMAN. Mr. Ayers.

Mr. AYERS. I am anxious to keep the record straight on it.

Mr. POOLE. Surely.

Mr. AYERS. Now, I put the question to you: Did that order only affect permits upon which extensions have heretofore been granted, and I understood your answer to be yes.

Mr. POOLE. That is correct.

Mr. AYERS. Now, in answer to the gentleman from Oregon, you say it also affects the permits that are granted in January of 1935. It cannot affect new permits, can it?

Mr. POOLE. Not a new permit, no.

Mr. AYERS. That is an agreement within itself.

Mr. MOTT. Then your answer to Mr. Dimond's question is no? Mr. RICH. Let me ask you, at this point, this question:

When Mr. Ayers made the statement that a contract or agreement made since the 1st of January could not be affected on the 1st of May, but I understood Mr. Poole to say, a few moments ago, that all contracts were contemplated to expire on the 1st of May; so that the Secretary may make any changes that he would like to in the renewal

of a contract, or consideration of a new policy, if this bill is put into effect.

Mr. AYERS. Yes; but these new ones would not expire on the 1st of May.

Mr. RICH. Mr. Poole said they would.

Mr. MOTT. Mr. Poole said they would, yes.

The CHAIRMAN. Let us have Mr. Poole clarify this statement. Poole will proceed and clarify his statement.

Mr.

Mr. POOLE. When permits are issued originally, they must be issued for a period of 2 years, under the terms of the law. I think I am correct in that. An extension may not be given on an outstanding permit for a period longer than 2 years, but it may be issued for a lesser period of time. If a new permit were issued January 1, 1935, that permit would run for a period of 2 years and would not be affected by this order of May 1, 1935; and if an extension was made of an outstanding permit on January 1, 1935, that extension will very likely run to May 1, 1935, or a period of 4 months.

The CHAIRMAN. In other words, it being limited to the months or years within the permit.

Mr. RICH. Were there very many extended for 2 years during the year 1935?

Mr. POOLE. I think that, in round numbers, there were 1,600 or 1,800 permits that are outstanding, that will expire on May 1 of this year, that were extended to that period. I do not know how many were extended each month to that date.

Mr. RICH. How many were renewed during the year 1935, that would carry over beyond the 1st of May, for the 2-year period? Mr. POOLE. How many new permits were issued?

Mr. RICH. Yes.

Mr. POOLE. I would not know without consulting the record. Mr. RICH. Was there any considerable number?

Mr. POOLE. About 100 new permits issued monthly.

Mr. RICH. I will say to you fellows who live out in the West, that you people had better watch out.

Mr. DIMOND. Mr. Chairman, may I ask another question?

The CHAIRMAN. Mr. Dimond.

Mr. DIMOND. Mr. Poole, suppose a permit has been issued on January 1, 1935. The normal life of that permit, as fixed by existing law, would not be affected by this act?

Mr. POOLE. That is correct.

Mr. DIMOND. Suppose that an extension has heretofore been granted on that, which extends beyond May 1, 1937, would that extension be affected by this act?

Mr. POOLE. 1935?

Mr. DIMOND. 1935; yes.

Mr. POOLE. It would not be affected.

Mr. DIMOND. I thank you.

Mr. POOLE. You understand, there is a saving clause in the back end of the bill which protects any valid and existing right, whether it be under a lease or permit.

Mr. DEMPSEY. Mr. Chairman, I would like to ask Mr. Poole what will be the position of the people who have had permits that have been extended to May 1, 1935, in the event that this or some additional legislation is enacted?

Mr. POOLE. Congressman, undoubtedly there will be a hiatus between that date and the passage of that legislation. Assuming that the legislation is passed, the Interior Department of course would have to take care of the permittees who had equities, and give them a further extension.

Mr. DEMPSEY. But assuming we did nothing at this time, would it be in the discretion of the Secretary of the Interior as to what he would do?

Mr. POOLE. I think he has always had the discretion, or it has always been in his discretion as to whether or not an extension would be granted.

Mr. WHITE. May I ask, at this point, this question: Is not the Secretary of the Interior authorized under existing law to issue permits for all oil leases and prospecting, and is he not permitted, under the existing laws, to renew those permits?

Mr. POOLE. Yes, Congressman.

Mr. WHITE. What is the advantage of the passage of this bill? Mr. POOLE. That is our case. It will take us about 2 days to tell you that.

The CHAIRMAN. Mrs. Greenway, did you wish to ask a question? Mrs. GREENWAY. I think Mr. White has just about answered the question, but I still do not understand why, if the Secretary of the Interior has the power (which apparently is given him by former legislation, and has made the statement that his policy will be changed) this bill is necessary to allow a change of policy.

Mr. POOLE. No; it is not.

Mrs. GREENWAY. Could he change his policy without this bill?

Mr. POOLE. Yes. I might suggest that Secretary Wilbur, while he was Secretary of the Interior, changed his policy to the extent of issuing no further permits, at all, or extensions for a period of time. Mr. WHITE. The matter is within the discretion of the Secretary and not mandatory?

Mr. POOLE. That is correct, Congressman.

Mr. MOTT. The Secretary could only change the policy within the limits of the existing law?

Mr. POOLE. Correct.

Mr. MOTT. Which I understand is not entirely discretionary, but he is governed by the terms of the law?

Mr. POOLE. That is certainly true.

Mr. MOTT. Now, we will perhaps discover, when we come to analyze this law, that the main purpose of it is to give the Secretary of the Interior wider discretion than that contained in the bill of 1920; is that not correct?

Mr. POOLE. I think not. I do not think the discretionary powers are enlarged. It is a change of the fundamental system under which oil and gas is developed on the public domain.

Mr. WHITE. How could you have it changed in the departmental system without increasing the discretionary powers of the Secretary of the Interior?

Mr. POOLE. I think we have spelled that out in considerable detail in this proposed legislation.

Mr. MOTT. This is a departure from the departmental policy.

Mr. ROBINSON I think we should have Mr. Poole give his statement, Mr. Chairman.

Mr. POOLE. Mr. Chairman and members of the committee, if you will permit me just a minute, I would like to make a statement, and present to the committee the agenda, which shows the manner in which we propose to present our evidence in substantiation of the legislation which is now under consideration by this committee. We first wish to give you a general picture of the commercial operations in oil and gas development on private lands; secondly, to explain the provisions of the law of the various States relative to the development of oil and gas on State-owned lands; and, thirdly, give you the method of production of oil and gas on Indian lands; and, fourth, a brief statement of the history of the oil and gas development on the public domains, both under the placer laws and the leasing act, which is now being considered for amendment; and, fifth, a statement of the history of the leasing act, its legislative history in the main; and, sixth, the inadequacy or the evils that have arisen under the laws, the leasing act of 1920; and, lastly, the objective which we hope to secure in the pending legislation.

The first witness, Mr. Chairman, which the Department of the Interior would like to have heard, is Mr. Stabler, of the Geological Survey, Mr. Herman Stabler, the head of the Conservation Division of the Geological Survey. He will give you a picture of the general commercial production on private lands.

The CHAIRMAN. We will be glad to have Mr. Stabler testify.

STATEMENT OF HERMAN STABLER, CHIEF CONSERVATION BRANCH, UNITED STATES GEOLOGICAL SURVEY

Mr. STABLER. Mr. Chairman, my name is Herman Stabler, and I am chief of the conservation branch, United States Geological Survey.

I have been employed in the Department of the Interior since 1903. As early as 1904, my work took me out into the public-land States, and I spent most of that year in New Mexico and California and Nevada. Since 1910, my work has been almost exclusively concernedwith problems of the public domain.

In 1922, I was placed in charge actively of the Geological Survey, the activities of which were concerned with operations under the leasing law. On July 1, 1925, there added to those activities, certain functions that had theretofore been performed by the Bureau of Mines, namely, the supervision of operations in the field.

Since the date given I have, therefore, been in charge of all activities of the Geological Survey relating to the leasing act, and that includes pretty much everything except the record and adjudication of applications, matters of record and law which are handled, for the most part, in the General Land Office, and matters of policy, which of course are handled in the office of the Secretary.

This employment, has given me, I might say, a smattering, a superficial knowledge of the oil industry, particularly that part that is conducted on public lands. It has, of course, given me a rather intimate detailed knowledge of the working of the oil and gas provisions of the leasing act on public lands.

I make that statement in order that you may have a better basis on which to accept or question or reject anything that I might have to say.

Mr. MOTT. What year was it, may I ask, that Secretary Fall got into the Teapot Dome?

Mr. STABLER. 1921.

Mr. MOTT. Thank you.

Mr. STABLER. In opening my remarks, for the benefit of the mem-bers, of the committee who may not be familiar with it, I would like to give a very brief sketchy outline of the oil industry.

Prior to 1850, all the oil that was used in the United States was produced by coal, by distillation. During the fifties it was discovered that petroleum that was produced from wells that had been built for salt and coal, where oil was struck, was just as good, apparently, and would serve the purpose just as well as oil that had theretofore been obtained from coal.

Accordingly, in 1857, the first oil exploration company was formed, and in 1859 the first well was drilled for oil. That was the famous Drake well of the oil industry, drilled at Oil Creek, Pa., and on August 28, 1859, it was completed to a total depth of 69%1⁄2 feet. The next day the driller discovered that the hole was filling full of oil, and it proved to be a 25-barrel oil producer.

That initiated something of a stampede in the oil business. During 1860, about 117 wells were drilled. In the following year, 1861, the first flowing well came in, and several wells flowing from 2,000 to 2,500 barrels a day, were completed in 1861.

In 1859, the total production of the country was 2,000 barrels and the average price of oil was $16 a barrel. In 1860 the production had risen to 500,000 barrels for the year, and the average price had dropped to $9.60 a barrel.

In 1861, 2,114,000 barrels of oil were produced at an average price of 49 cents, and at the end of that year the current price was 5 cents a barrel.

That was the first period of overproduction, since which there have recurred periods of surplus and deficiency of oil.

Passing to the public land States, the first discovery in Colorado was in 1862, in California in 1866, in Louisiana in 1902, Utah 1907, New Mexico 1913, and in Montana 1916.

The history of the industry is dependent very largely on the development of the internal combustion engine and the automobile.. The first internal combustion engine was developed in 1883, the first automotive in 1887, and the first Diesel engine in 1895.

Early in 1865 a discovery was reported on the public lands in California. The Commissioner of the General Land Office held, "It is not the policy of the Government to deal with petroleum tracts as ordinary public lands," and ordered that they be withheld from disposition. This inaugurated a general policy of withdrawal of oil land from disposition as agricultural lands, and gave recognition to their value, or to their status as valuable mineral lands. The lode mining law of public lands was passed in 1866, followed by the placer act in 1870 and the amendment of the placer act in 1872. None of these laws made specific mention of oil.

On January 20, 1875, the Commissioner of the General Land Officeheld the oil deposits enterable under the placer laws. These laws provided for claims of not more than 20 acres for an individual, and not more than 160 for an association, but there was no limit on the number of claims that an individual or association could take up, but: it provided for no location until the discovery of minerals within the boundaries was made.