Mr. STEELE. I am with the planning and coordination committee of the petroleum industry. That is the code authority back of it in Washington. Mr. GREEVER. I may say for Mr. Steele that he does not appear in his representative capacity. I asked Mr. Steele to appear here because I have known him for 12 years and he and I went through the battle of these permits years ago in lawsuits, and I knew that he had some very definite ideas about the subject. Mr. CRAWFORD. May I ask Mr. Steele a question? Do I understand now that what you are suggesting here is that a law be passed, if possible, carrying provisions so definite that there shall be no fluctuations whatsoever with reference to the rules or regulations that may be issued under that law which would unstabilize your conditions out in the field. Is that what you are asking for? Mr. STEELE. Possibly not quite as stringent as you suggest, but at least definitely committing the Department to a policy. Mr. CRAWFORD. A definite policy. Mr. STEELE. Yes, sir. Mr. CRAWFORD. Over an extended period of time. Mr. STEELE. Yes, sir. The rules and regulations cover more the case of those things which will necessarily have to be left to the discretion of the Secretary. The technique of the industry changes rapidly, so that what may be good today as to a program would not be good tomorrow; but the lessee would know that he had certain rights that were not taken from him. Mr. CRAWFORD. So what you object to is any kind of a law, whether it is the 1920 act or some new act, which leaves the discretion in the power of any man, any one individual, to make such fundamental changes as will disturb the rights of the permittees and lessees? Would you go that far, or stop with the permittees ? Mr. STEELE. If you pass this bill you will not have any permittees. Mr. CRAWFORD. If we pass such a law as that we will have to deprive the Secretary of the Interior of the discretionary power which he has had heretofore? Mr. STEELE. Not entirely. But you will at least bind the Secretary. And this is not pointed at Mr. Ickes, but it applies to any Secretary or succession of Secretaries. The statement was made and not contradicted, when made by the industry, that the Secretaries at times have taken permissive acts of Congress and converted them under the broad power of the Secretary so that they are compulsory measures. Naturally, any industry resents conditions, or a set of conditions, under which such a thing can happen. Mr. CRAWFORD. Is it not a fact that we must expect that very thing to happen if we pass these laws carrying broad powers, to the end that when an industry does get into trouble it may be somewhat doctored up by the Government? In other words, when hot oil begins to flow you want the Government to act, do you not? Mr. STEELE. That is a poor illustration, if you will pardon me for saying so, because the Secretary of the Interior under the present act has the power to regulate production on public lands only, and the industry will not object to that. Mr. CRAWFORD. Do you object to any kind of regulation-I mean, not only regulation under the authority he has today-but do you object to any kind of regulation? Mr. STEELE. It so happens that I helped write some regulations under this act and also for development in Columbia. I do not object to supervision, but unfortunately, supervision, or the idea of supervision, too often is construed to mean control. That is the think I suggest you try to get away from. In other words, I suggest that you definitely state whether you want the Secretary of the Interior to supervise or control. If you want him to control, say so. That is within your power. If you want to make these terms reasonable, and he is to act as supervisor, to protect the interests of the Government, make your supervision as light as possible in order to accomplish the results. I contend that it is the results you are after and not the methods of obtaining those results. Mr. CRAWFORD. I think I understand you now pretty well. Mr. STEELE. There must be supervision, there must be regulation, and there must be a little power. Mr. GREEVER. I want to ask Mr. Steele a question. As a matter of fact, when it came to regulations, this permit law of 1920, or what we call the "leasing law of 1920 ", was a most uncertain proposition practically from the time when the lease became 2 years old down to the present date; is that not true? Mr. STEELE. Yes. Mr. GREEVER. And it has caused a lot of confusion and anxiety, and an unsettled condition in the industry so far as these permits were concerned; that is true, is it not? Mr. STEELE. That is true, and the same thing exists today-that uncertainty. Mr. GREEVER. That same uncertainty exists today; and that is one reason for this bill, to provide for something to be done which will definitely establish what the present permittees have and what the future policy will be in respect to them, in order to remove that uncertainty. I want to ask you one more question. Suppose you were going to deal in a lease, which would you rather have, a definite lease from the Government for a definite period at a definite royalty, or would you rather have one of these permits? In asking that question, we will say that you are the average citizen that you spoke about. Mr. STEELE. If you will clarify that-as they should have been in 1907 or as your bill proposes? Mr. GREEVER. What changes would you make in the bill? Mr. MOTT (interposing). Where is the language in the bill that you object to? Mr. STEELE. In reference to uncertainties as to royalties, on page 7, lines 16 and 17. As I pointed out, from 1212 to 25 percent is not specific. It may mean anything. Mr. MOTT. How would you change it? Mr. STEELE. Say what you want it to be. If you want it to be the same as a private lease, state it to be a flat 1212 percent-a definite, flat 121/2-percent royalty. Mr. MOTT. You object to the discretion in there between 121⁄2 and 25 percent? Mr. STEELE. Yes. Mr. MOTT. Why is that? What is your objection to that? Mr. STEELE. I do not know whether you were here during the early part of my statement. Mr. MOTT. No; I was not. I have been obliged to be away part of the time while the hearing was going on. Mr. ROBINSON. That is explained in the record. Mr. GREEVER. Under the old act it was a minimum royalty of 1212 percent, which, under the regulations, went as high as 33% percent. This mentions the amount definitely and requires a royalty of from 1212 to 25 percent. These are leases on proven lands. Mr. MOTT. You think it ought to be a flat 1212 percent? Mr. STEELE, I will say 1212 if the Secretary is sincere in backing this bill, stating in effect that all he wants is to have the Government lands on a basis of equality with private lands. Then just make it a flat 1212 percent. But I think it is within your power to state whatever you may want. If you make it more than that, then, instead of putting these leases on an equality, you are giving them a highly preferential basis. In this same connection, on page 7, there is another word that I think should not be in here. It says, "which are known or believed to contain ", and so forth. Who is going to "believe"? That is in line 8, on page 7. There is very wide discretion there. Mr. ROBINSON. If there are no further questions to be asked of Mr. Steele, Mr. Stubbs has a letter that he would like to read into the record. Mr. STUBBS. Mr. Chairman, I have been endeavoring to find out what the oil interests back in California think about this bill, especially as it pertains to my district. So I sent a number of copies of the Senate and House bills relating to the oil and gas permits to interested parties. I have here a brief letter from T. E. Klipstein, of Bakersfield, Calif., whom I know to be a man of some authority along this line, and I judge from his letterhead that he is perhaps an owner of and dealer in oil permits. He replied, as did a number of others, and this reply is typical of the feeling of the men back in the hinterland who have written their expressions to me. Mr. GREEVER. Is this man a dealer in permits? Mr. STUBBS. I do not know whether he is an owner and a dealer, but I do know that he is considered a competent authority, and he does deal in oil permits. He is a foremost citizen of Kern County in California and very prominent in the oil industry. He says: I have examined these bills very carefully and, as drawn, I do not think they should pass without amendment or modification. As you know, the Rocky Mountain Oil & Gas Association, of Casper, Wyo., has submitted some amendments to the bill which I think are a vast improvement to the original bill, and I would recommend that, if there is a chance of the bill being passed, that you should support these amendments, and especially the one extending the permits to July 1, 1937. As Mr. Steele brought that out in his statement, I felt that this would corroborate his views. And again this letter says: Mr. Stubbs, the royalty part of the bill should be as liberal as possible to enable the little fellow to realize any remuneration whatever. He reports that if the amendments recommended by the Rocky Mountain Oil & Gas Association are adopted, he can see no real harm in the bill. "As I understand it," he continues in his letter, "it does not affect permits already issued prior to July 1, 1935, and in good standing." Tom Klipstein knows his business and is a very fair man. His views probably are the views of hundreds of operators in my district who are interested in suitable and fair legislation of this nature. As I got it from Mr. Steele's evidence, if we are to have a sliding scale of royalties, it would be far better to have the present sliding scale, in your opinion, Mr. Steele, in that it provides that overriding royalty to the permittees at this time, rather than have the minimum royalty of 122 percent. If we are to have that sliding scale Mr. STEELE. No; I do not think you have stated what you want. You say to have the present sliding scale. If you eliminate the 5percent acreage award for discovery you had better come to a straight 1212 percent rather than to have the present sliding scale. Now, if you stick to the permit idea or the lease idea, and then you will be giving the wildcatter a chance to meet the required conditions on a part of the land, then the Government should have the advantage on the other part, along the same line as now. Does that answer your question? If you eliminate 5 percent you would not give the permittee or the wildcatter any advantage by sticking to the sliding-scale royalty as it now exists. Mr. MASSINGALE. It just eliminates the right to the royalty. Mr. STEELE. Which the Government seems to object to, despite the fact that Congress arranged that and agreed to it. Mr. ROBINSON. I understand Mr. Stewart desires to make a statement. Will you state your name and whom you represent? STATEMENT OF HAL W. STEWART, FINDLAY, OHIO, REPRESENTING THE OHIO OIL CO. Mr. STEWART. My name is Hal W. Stewart; I reside in Findlay, Ohio; I formerly resided in Caspar, Wyo. I am appearing here this morning representing the Ohio Oil Co. and its associated company, the Mountain Fuel Supply Co. I do not represent any organization, but I thought it was advisable for me to be here and see what kind of an act was going to be passed, inasmuch as the people I represent operate on public lands very extensively. We operate in Montana, Wyoming, Colorado, New Mexico, Utah, and California. All of the interests of these companies are on record in the Interior Department and known to the Department. My remarks will be brief, Mr. Chairman, in that I will merely say we agree with practically all that Mr. Steele has said as to the matter of definiteness and certainty in leases. If you are going to make a lease to an operating company-and our company is one of those to whom the United States may lease its lands-we would like to know what kind of a lease we are going to get. We would like to be able to predicate our plans on some sort of a definite proposition. As to sliding-scale royalties, I feel as Mr. Steele does, that if you are going to ask a company, or an operator, a lessee, or a permittee, be it a large company or an individual with small capital, to take a lease on public lands, you should at least let him know what he is getting, especially when it is proposed under this act to put the land up at public auction and lease it to the highest bidder. I want to direct my remarks particularly to the paragraph commencing on page 8 of the committee print of this bill. That is the paragraph beginning on line 1, page 8, that provides that The Secretary of the Interior, for the purpose of more properly conserving the oil or gas resources of any area, field, or pool, shall also require that leases hereafter issued be conditioned upon an agreement by the lessee to operate under such a cooperative or unit plan for the development and operation of any such area, field, or pool as he may approve or prescribe. In the first place, I want to make it definite and certain that I and the people I represent, and I believe most of the operators—at least all to whom I have talked-see the advantage of unit operation. However, unit operation may take a great variety of forms. If the Secretary of the Interior in issuing a lease and in putting a lease up at public auction to the highest bidder, in expecting to get the highest possible bonus for such a lease, is going to require that such a lease be subject to such plans of unit operation as the Secretary of the Interior may prescribe or direct, the lessee will not have the faintest idea of the sort of a lease that he is getting. That, of course, as far as the operator is concerned, would probably lead such an operator not to bid at all on the lease or to bid at a lower figure than he otherwise would if he knew what sort of a unit operation plan was expected. Such a provision directly affects adversely, I believe, the interest of the United States, in that the United States will not be able to lease land under such a provision at such a royalty and get as high a bonus for that lease as it would if the operator or prospective lessee were told definitely what kind of a proposition he was to be expected to get, and under which he would be expected to operate. For instance, we have had experience during the last 6 or 8 months-and all operators have had the same experience-in endeavoring to work out unit operation. We have tried to work out unit operations for conservation, because we are interested, not only in the conservation of natural resources but also the conservation of our cash, in operating. We have submitted some 12- or 15-unit operation agreements to the Department, all of which were submitted by March 1, and only one of those has been acted upon. We do not know, as to those unit operation plans which we have submitted, whether they will be acceptable, or what will be acceptable. I know unit operation is something very difficult to work out; I have tried it. I have worked out a few. But there is a vast difference of opinion as to what a proper sort of unit operation may be, and the Secretary of the Interior, acting in the best of faith, might prescribe one form or another form, and the operator does not know which form he is going to get. |