like to know just what investment was made in Montana during the period of the depression on the public lands. Mr. JACKSON. The new well drilling in Montana was necessarily carried on on State and privately owned land during the last few years. You must remember that the Department withdrew all permits in 1929-32. Mr. DEMPSEY. I have that in mind so that this bill does not affect those people who have been drilling in Montana insofar as private land or State lands are concerned. Mr. JACKSON. It should not affect it. Mr. DEMPSEY. I say this bill has no effect whatever on State land or private land. Mr. JACKSON. We have more apprehension about the future effect than in the past and present. Mr. DEMPSEY. That is not answering the question I asked you. I asked about the development and where the money came from to develop. The money came from outside the State probably to develop these lands. Mr. JACKSON. If you meant this Federal land, I would like to correct my answer. Mr. WHITE. My question was not limited to the period of the depression. My question took in the development of oil land in Montana and particularly, as I understand, most of the lands were on the public domain or a large part of them. Mr. JACKSON. They more or less involve public domain land. The leases often are not located on the Federal land, but were on the neighboring land, State, and privately owned land, but it had an effect on the Federal land, and I would say that the benefits resulting to Montana from new well drilling due to the enactment of the act of February 25, 1920, was certainly more substantial and far-reaching, but if we must limit it to the years of 1930-35, then I would have to qualify it and say that most of the money expended in the State since 1930 in oil operations has been expended on privately owned land and State land. Mr. DEMPSEY. Let me ask you this: You say that prior to the time most of the money was expended on private and State-owned land, not on public domain land. Is that right? Mr. JACKSON. Either adjoins or close by in the same structure. Mr. DEMPSEY. Assume they adjoin. If it adjoins so closely that it was offsetting those public lands would be drilled? Mr. JACKSON. Yes; I have a record here of any number of leases. Mr. GREEVER. Do you know of any wells that were drilled in wildcat territory for oil and gas, permits issued by the Government that would not have been drilled if the Government had required 1212 percent royalty instead of 5 percent royalty on the acreage? Mr. JACKSON. Yes. I know of one, at least, personally, that would not have been drilled. Mr. GREEVER. Do you mean, then, that the 712 percent, between 5 percent and 122 percent, was responsible for the drilling of the well? Mr. JACKSON. Yes; the permit holdings in that particular area, and the advantageous royalty set-up, was the principal reason for drilling that particular well. I remember that off-hand. Mr. GREEVER. Who got the 72 percent royalty, the operating company or somebody else? Mr. JACKSON. This particular well was drilled by a syndicate, and the members of the syndicate owned the permit and transferred the operating rights with the royalty reservation, and they put up the money to drill that well. Mr. DEMPSEY. Do you know of more than one of them in the State of Montana? Mr. JACKSON. I know that one, that occurs to me at the moment. I can probably get lots more that were greatly influenced by that. Mr. WHITE. In your opinion, would the provision for the reduction of the royalty under this change and the requirements for notification operate to discourage oil investors and oil developments in the State or public lands? Mr. JACKSON. It would, I believe, ultimately, but at the moment on account of the supply of oil available, I do not believe that there is going to be any great stimulus of wildcatting for a year or two in any event, no matter how favorable the conditions might be as to titles and leases. STATEMENT OF CLAY TALLMAN, MID-CONTINENT OIL & GAS ASSOCIATION, TULSA, OKLA. Mr. TALLMAN. Mr. Chairman and gentlemen, I come here as a member of a committee of the Mid-Continent Oil & Gas Association, an oil-trade organization covering the whole midcontinent area, and the members of which association include probably the largest and many of the more important operators on the public lands. I speak in a representative capacity. My platform is laid down for me in advance by the board of directors of that organization in the form of a letter which the secretary of the organization addressed to the chairman of this committee a few days ago, under date of April 10. In the meantime our organization was in close touch with the New Mexico Oil & Gas Association as some of the members of that association are also members of ours. Mr. V. S. Welch, the president of that organization, is also on our committee of our organization. He sent me a copy of the telegram which he sent to the chairman, representing the executive committee of the New Mexico Oil & Gas organization. I would like to be sure that the telegram goes into the record. It is a telegram under date of April 9, 1935, and reads as follows: CLAY TALLMAN, Midcontinent Oil & Gas Association: ARTESIA, N. MEX., April 9, 1935. I hand you herewith resolution unanimously passed by the executive committee of the New Mexico Oil & Gas association: "Resolved, That the passage of Senate bill 1772 and House bill 5330, known as the 'O'Mahoney and Greever bills', respectively, be and hereby are opposed; further 66 Resolved, That it is deemed for the best interest of all concerned that no amendments to the existing Oil and Gas Leasing Act be made at this time, excepting that all existing permits be extended automatically for 2 years; that such extensions would give permit holders and those holding operating agreements sufficient time to become adjusted to conditions following the economic depression; it is deemed unfair to demand immediate drilling on every permit at this time, as those interested in the oil industry have felt and suffered from the depression and should be given a chance to recover; further "Resolved, That if said Senate bill 1772 and House bill 5330 be considered at this time it is especially urged that amendments suggested by the Rocky Mountain Oil & Gas Association be considered in connection therewith; further 'Resolved, That the president and secretary of the New Mexico Oil & Gas Association be, and they hereby are, instructed to send a copy of this resolution to New Mexico Representatives in Congress and to the Committee on Public Lands and Surveys." The following resolution was also passed: "Resolved, That the New Mexico Oil & Gas Association and the members thereof do hereby express their opposition to compulsory unitization, in that it is deemed unfair to the small producer and tends to discourage the small operator." Resolution favoring Cutting bill: 66 'Resolved, That the passage of Senate bill 2398, introduced by Senator Bronson Cutting, of New Mexico, the same being a bill authorizing extensions of time on oil and gas prospecting permits, and for other purposes, is strongly urged; further— 66 Resolved, That the president and secretary of the New Mexico Oil & Gas Association be, and they hereby are, instructed to send a copy of this resolution to New Mexico Representatives in Congress and to the Committee on Public Lands and Surveys." Sorry am unable to attend committee meeting today. MIW.4/9/35. V. S. WELCH Mr. ROBINSON. Have you a copy of the letter forwarded to Mr. DeRouen? Mr. TALLMAN. Yes. He has it and mentioned it. You can take that copy of it. I think he has the original somewhere. Mr. ROBINSON. Is it a letter from the New Mexico Oil & Gas Association? Mr. TALLMAN. No; only the telegram is from them. I assume that telegram was received by the chairman. Mr. Welch sent me what he says is a copy of it. I want to be sure it is placed in the record. Mr. ROBINSON. That was to the Committee on Public Lands and Surveys. That is the Senate committee. Mr. TALLMAN. The resolution says that they are going to send one to each committee on each bill. Mr. ROBINSON. As I understand you, there is a letter besides this telegram. Mr. TALLMAN. No. The letter is from the Mid-Continent Oil & Gas Association, which the chairman mentioned the other day and I think placed in the record. The telegram is from the New Mexico organization. Mr. ROBINSON. Did the chairman place this letter in the record? Mr. TALLMAN. I think he did. If he did not I want to be sure that the letter from the Mid-Continent Oil & Gas Association under date of April 10 is placed in the record. I will refer to it because it outlines our position on this whole matter. Mr. ROBINSON. Proceed. Mr. TALLMAN. We have had a hearing here for 4 days and until the last few minutes there has been no mention made of the real purpose and significance of this bill as I conceive it and no adequate explanation thus far of the purpose, as I conceive it, has been made to this committee. The bill involves many angles, many questions, and large interests, and the question of what I regard as repudiation of the rights acquired under the permits which should be protected, and in representing these large interests, many of them, big and little, all are members of our organization, I feel that either by me or other members of our committee who are here this matter should be fully presented to your committee. Mr. RICH. Do you believe that contracts that are properly made with any department of the Government should be carried out to the letter whether it is to the advantage of the Government or to the disadvantage of the Government? Mr. TALLMAN. Of course, unless some substitute can be made for it, a fair compromise in the situation. Mr. RICH. An amicable adjustment. Mr. TALLMAN. Yes. Mr. ROBINSON. My feeling is this. We have given the Government plenty of time to present its case and without any limit, and as far as I am concerned, unless the committee has some different idea I think we should give those opposing this bill an equal opportunity to present their case, so that there will be no discrimination here in taking time. Mr. TALLMAN. I just wanted to make clear that I feel that we are not through yet. I know that other witnesses will want to come on and I want to make it clear. Mr. ROBINSON. Let us have it understood then that you may proceed without restriction until 11:30 and if you are not through then we will have to adjourn to be on the floor of the House. Mr. TALLMAN. That is perfectly all right. This letter sets out our views on this bill. I will read as little of it as necessary to get the idea across. There is first the opening paragraph and then it goes on: Though at the time of the passing of said leasing act there was no little controversy and difference of opinion over the advisability of legislation which contemplated permanent ownership by the United States Government of lands within the States, we are of the opinion that the leasing policy having been decided upon, said leasing act, speaking generally, has worked out as satisfactorily as could be expected. Under it large sums have been expended for exploration on the public domain. In 1929 I made a careful estimate of the Rocky Mountain States alone, showing that $20,000,000 had been spent in exploration under this act, and a conservative guess today is $30,000,000 exclusive of California, not in drilling up fields after they are found but in exploration. The original act, the amendments thereto, and the various extension acts that have been passed, have made this legislation sufficiently elastic to enable the Department of the Interior to require or to defer development and production on the public lands in line with the rapidly changing conditions in the oil business during the last few years. At the outset, therefore, we are disposed to question the advisability or the necessity of such radical changes in the policy of the Government as represented by existing laws and departmental practice, as are proposed by these bills. In the absence of quite material amendments, we are of the opinion that it is preferable to continue under the present laws and the departmental practice heretofore prevailing, supplemented by further reasonable extension acts from time to time as needed, and the elimination from existing laws of certain restrictions and limitations of acreage holdings which, we believe, have been found wholly unnecessary. Assuming, however, that this bill is to be regarded as an administration measure and I do not think there is any doubt but that it is to be so regarded in the absence of any other information, and a reading of this bill would at once disclose its origin with the exception of one proviso which Mr. Greever mentioned yesterday-assuming, however, that this bill is to be regarded as an administration measure which will be pressed for enactment, it is our considered opinion that the bill should be amended, at least in the following respects: 1. If the granting of permits and extensions is to be discontinued, and particularly in view of the policy that has been followed in the past with respect to extensions, we regard it as altogether necessary that provision be made in the bill for an automatic extension of time of not less than 2 years on all outstanding permits, to give permittees and operators a reasonable opportunity to adjust themselves to the policy of more active drilling and development, which is apparently contemplated as a result of this bill; otherwise it is not unlikely that many permittees or the holders of operating rights on permits may be deprived of any possible benefit from their previous efforts and expenditures. Now let us try to get this picture. The leasing act was passed in 1920. It has been stated here that it had two main purposes. One was to dispose of what is known as the " oil-land controversy ", where the claimants of the old placer claims were in dispute with the Government as to the validity of their rights, and Congress sought to adjust that and did so by granting leases. The other is to map out another plan for the disposal of the oil rights on the public lands after an 8-year controversy and discussion. The United States has adopted this plan of the permit system. Whether it is good or not that is the plan they adopted, and the law provided that anybody who was a qualified citizen of the United States could apply for and get a permit. The permit states you have the right under that permit within 6 months to start a well, within 1 year from the date of the permit to get your well drilled 500 feet, and within 2 years to get it drilled 2,000 feet. Thousands of permits were issued, and nobody had made any adequate preparation for drilling of the wells on all these permits. Congress then, doubtless very properly, adopted a plan of extensions. Between 1922 and 1932 five extension acts were passed. The first three of these extension acts provided that permits could be extended on a finding by the Secretary of the Interior that the permittee was unable, with the exercise of diligence, to complete the drilling within the time allowed by the permit. The last two acts, for reasons I will explain later, simply provided that the extension could be granted within the discretion of the Secretary with no reason at all necessarily. As has been stated here, a great many permits were issued altogether up to date, and Mr. Stabler told us 38,000. Some have been canceled out from time to time. He says there are 6,400 left, and 2,400 of these liable to be canceled, subject to cancelation on May 1. The other 4,000-the rest of the 6,000 are not subject to be canceled on May 1. Mr. STABLER. They do not expire until after that date? Mr. STABLER. They run as much as a year; nearly a year? Mr. TALLMAN. They require drilling within 6 months if they are new permits, so that the whole 6,000 are really subject to cancelation on May 1 or within a short time thereafter. We are not con |