Mr. AYERS. I have not studied that method of extension. I cannot say I agree with it. However, temporarily, it tides us over for the 60 days. Mr. ENGLEBRIGHT. You mean the executive order of the Secretary of the Interior? Mr. MOTT. No; I mean the suggested amendments by the Secretary for H. R. 5530, which make the extension up to about the same date. Mr. AYRES. Six months elapses under different rules. Mr. MOTT. If we agree that the rules and regulations and conditions under which permittees are to operate are right, we think they should operate under those conditions and be under the conditions read by Mr. White here a minute ago-I cannot see why the extension proposed by the Secretary is not just as effective as the one you propose in your bill, H. R. 7573. Mr. AYRES. It may be, after we study it. Mr. MOTT. It may sound rather liberal, coming from me, but I am rather inclined to believe that this is one of the infrequent times when the Secretary of the Interior's Office is proceeding with a sound proposition, and I think that this is a case here where they are handling something in connection with which they really have exclusive jurisdiction. We have had propositions before us here where they were interfering with the jurisdiction of everybody else, but I consider that here they are on the right track. Mr. AYRES. My idea is to get the report straightened out as to what they really meant by the report, and really what is the fact that the bill H. R. 7573 only extends the permit, and they must furnish bond during that extension and must operate under the existing law which requires a $5,000 bond, and all rules would be lived up to. I think we have agreed on that. Mr. ENGLEBRIGHT. You do not believe that your bill is necessary, Mr. Ayers? Mr. AYERS. I am not saying my bill is not necessary. I have not studied their proposed amendment. Mr. MOTT. We cannot go any further on it now. The CHAIRMAN. We are going to adjourn in just a minute. Mr. White. Mr. WHITE. Because of what the Congressmen from Oregon and Montana have said, it is my understanding that there is a very material difference in the operation of the two measures. One is extended on a certain condition, that they enter into a unit rule, and one is just to give them an extension as is. Mr. MOTT. That is not quite what I meant. What I asked Mr. Ayers is, whether the extension proposed by amendment as recommended by the Secretary would not fulfil all of the results that he wanted. Mr. WHITE. The extension carries a condition that they will enter into certain stipulations and agreement proposed by the Secretary of the Interior. Mr. POOLE. No, Congressman; the proposed amendment of the Interior Department makes no statement about unitization or necessitates such a requirement. We think, inasmuch as all these previous conditions which have been made have been conditioned upon unitization that that will continue. Mr. WHITE. What will continue? Mr. POOLE. The stipulation that they would enter into such an agreement. Mr. WHITE. But this continuation of the Secretary gives him discretion. Mr. ENGLEBRIGHT. You are speaking of the Executive order now, and not the amendment which has been proposed? Mr. POOLE. The amendment does not so state. Mr. GREEVER. May I ask Mr. Poole one question before we adjourn, which I want him to think over a little bit? Mr. ROBINSON. Mr. Greever. Mr. GREEVER. It just occurred to me that there should be somewhere there in that amendment a little flexibility in the interest of conservation. Mr. ROBINSON. We might consider that. We are going to adjourn and leave the hearing just as it is, and reopen it when the Senate has finished its hearing. So that we will now adjourn subject to call on this particular matter. (Whereupon, at 11:55 a. m., the hearing was adjourned subject to call of the Chair.) DEPARTMENT OF THE NAVY, The CHAIRMAN COMMITTEE ON THE PUBLIC LANDS, House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: Having noted the introduction of the bill (H. R. 5530) relative to amending section 35 of the so-called "Leasing Act" of February 25, 1920, and having read the committee's report on this bill, I beg to inform you that I am unalterably opposed to the amendment as proposed. I am of the opinion that section 35 should continue in force as at present worded. The existing language was adopted by the Congress after mature deliberation, and I know of no valid reason why any change therein should be made now. As you, of course, know, the naval petroleum reserves were set aside by Executive orders for the exclusive use and benefit of the United States Navy until this order" (orders) "is revoked by the President or by acts of Congress." You are also aware of the national scandal and disgrace which was precipitated when a former administration attempted to alienate from the Navy Department the control and jurisdiction of these reserves. It was only after years of litigation and at thousands of dollars of expense that this control and jurisdiction was restored to its rightful lodgment in the Navy Department; in fact, the litigation is not yet ended. Since the establishment of the reserves the Navy Department has had to be constantly on the alert to prevent selfish interests intent on personal advantage or gain from divesting the Navy of its indispensable fuel reserves. In view of these facts alone, I feel that the Congress will proceed very slowly on any course of action which would tend to divorce the Navy Department from handling these reserves. Hardly a year passes but some effort is made to remove the Navy Department from control of the reserves. For the last 2 or 3 years these efforts took the form of having the control transferred to the Interior Department. If this had been done the Interior Department would of necessity have had to open up the reserves for immediate and complete development and exploitation. All of these efforts I have opposed in the past, and I will continue so to do. I cannot but feel that the present attempt to amend section 35 is but the entering wedge to bring about the exploitation of the reserves. It is the policy of the Navy Department to try to keep in the ground as much oil as possible. If the proposed change is made in section 35, constant pressure will be exerted to force the Navy Department to produce as much oil as possible so that the royalty proceeds will be increased and thus defeat the very purpose for which the reserves were set aside. In addition to the general objections outlined above, I would add the following specific objections to the proposed amending of section 35: (a) There is a possibility that the royalty production from the reserves may be applied to the purchase of privately owned sections in reserve no. 1 in California. A bill, H. R. 4756, introduced January 25, 1935, has a clause which would authorize the Secretary of the Navy to exchange Government land in reserve no. 1 and the right to royalty production from any of the naval petroleum reserves for privately owned land in reserve no. 1 in order to consolidate and protect the oil lands owned by the Government, with provisos that no exchange shall be made except with the approval of the President. This bill has not been pressed on account of pending controveries concerning title to some of the lands now held by private parties in reserve no. 1, and on account of other activities of the House Naval Committee, but if it is passed it is manifest that the production receipts from the reserves would be utilized for conserving the Navy's oil resources in the ground. (b) The Standard Oil Co. of California holds several sections of lands in naval petroleum reserve no. 1 and if they should start drilling these lands, there are 16 miles of boundary line in the productive part of the field that will require offset drilling on the part of the Government. Provision for such drilling, if necessary, has been made in all the annual naval appropriation bills since 1931. The large sums that would be required would not be a direct drain on the Treasury as long as the receipts from the existing leases are covered into the Treasury. (c) Considerable sums are required for repairs to wells in naval petroleum reserve no. 1, California, and naval petroleum reserve no. 3, Wyoming, in order to keep them in the best condition possible until they may be called upon for production. The amounts turned in to the Treasury far exceed the cost of the repairs and upkeep of the reserves, and thus the income from the reserves directly benefits the National Government in the form of miscellaneous receipts. (d) At the present time the receipts from the reserves are covered into the Treasury of the United States in accordance with section 35 of the act of February 25, 1920, and have averaged $1,600,000 per year since 1926. Present receipts, however are considerably lower than this average an account of restricted and controlled production and decreased prices. 66 In view of the fact that these reserves are not "public lands", but are set aside for a specific purpose, I know of no reason why these receipts should not be covered into the Treasury as Miscellaneous receipts." While it is not specifically my affair, I wish to point out that there is doubt whether it is wise for the Nation to diminish its miscellaneous receipts in order to build up special funds. It would seem better accounting procedure to have all such receipts covered into the Treasury and subsequently appropriated as desired by the Congress. As proposed by the amendment of section 35, approximately $29,000,000 will be deducted from miscellaneous receipts and credited, 70 percent to the "Reclamation fund" and 20 percent to the State within which the reserves are located for past production. While you have not asked for comment on other features of S. 1772 or its companion bill, H. R. 5530, I wish to point out certain other objectionable provisions contained therein, as follows: 1. On page 8, lines 17 and 18, S. 1772, it is stated "leases issued prior to July 1, 1935, under the authority of this act shall continue for a period of 20 years", etc. This is very objectionable, because it apparently continues these leases for a period of 20 years from the date of the passage of S. 1772. To this I am strongly opposed. Some of the leases in the reserves will expire in 1941 and 1942 upon the expiration of the first 20-year period. While it may be found desirable or even necessary at that time to extend some of these leases, it is certain that some of them should not be renewed for conservation reasons, and it is felt that conditions that exist at the date of expiration of the leases should govern the actions of the Secretary of the Navy at that time. 2. On page 10, lines 1 to 20, inclusive, and on page 13, lines 3 to 11, inclusive, section 2 (a), authority is granted to the Secretary of the Interior to perform certain acts under certain specified conditions. There is no objection to these provisions so far as they apply to public lands, but they should not apply to the lands within the naval petroleum reserves. Under the terms of an act of Congress approved February 25, 1928, Public, No. 76, Seventieth Congress, "jurisdiction over and the administation and enforcement of all oil and gas leases on lands in naval petroleum reserves issued pursuant to the provisions of section 18 and section 18 (a) of the act approved February 25, 1920 ", were transferred to the Secretary of the Navy. Since the provisions above referred to in S. 1772 are somewhat general in character, it is believed that they might very readily conflict with the provisions of the abovementioned act of February 25, 1928. Therefore, in addition to my objection to the amendment of section 35, I would suggest that S. 1772 be amended by adding a new section reading as follows: 66 SEC. 4. That nothing in this act shall be construed as affecting existing leases within the borders of the naval petroleum reserves and naval oil-shale reserves." Sincerely yours, CLAUDE A. SWANSON. [H. R. 8289, 74th Cong., 1st sess., Rept. No. 1101] A BILL To amend an Act entitled "An Act to promote the mining of coal, phosphate, oil, oil shale, gas, and sodium on the public domain", approved February 25, 1920 (41 Stat. 437; U. S. C., title 30, secs. 185, 221, 223, and 226), as amended 66 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That sections 13, 14, 17, and 28 of the Act entitled "An Act to promote the mining of coal, phosphate, oil, oil shale, gas, and sodium on the public domain ", approved February 25, 1920 (41 Stat. 437; U. S. C., title 30, secs. 185, 221, 223, and 226), as amended, are amended to read as follows: 'SEC. 13. That the Secretary of the Interior is hereby authorized, until and including July 1, 1935, but not thereafter, under such necessary and proper rules and regulations as he may prescribe, to grant to any applicant qualified under this Act a prospecting permit, which shall give the exclusive right, for a period not exceeding two years, to prospect for oil or gas upon not to exceed two thousand five hundred and sixty acres of land wherein such deposits belong to the United States and are not within any known geological structure of a producing oil or gas field upon condition that the permittee shall begin drilling operations within six months from the date of the permit, and shall, within one year from and after the date of permit, drill one or more wells for oil or gas to a depth of not less than five hundred feet each, unless valuable deposits of oil or gas shall be sooner discovered, and shall, within two years from date of the permit, drill for oil or gas to an aggregate depth of not less than two thousand feet unless valuable deposits of oil or gas shall be sooner discovered. The Secretary of the Interior may, if he shall find that the permittee has been unable, with the exercise of diligence, to test the land in the time granted by the permit, extend any such permit for such time, not exceeding two years, and upon such conditions as he shall prescribe: Provided, That all permits outstanding on the effective date of this amendatory Act, which on said date shall not be subject to cancelation for violation of the law or operating regulations and which have theretofore been extended by the Secretary of the Interior, shall be, and the same are hereby, extended until December 31, 1936, subject to the applicable conditions of such prior extensions: And provided further, That the Secretary of the Interior is hereby authorized, in his discretion, to extend for an additional period of not to exceed one year any permit on which diligence has been exercised during the extension period hereby granted, but no extension of any permit beyond December 31, 1937, shall be granted under authority of this Act or any other Act. Whether the lands sought in any such application and permit are surveyed or unsurveyed the applicant shall, prior to filing his application for permit, locate such lands in a reasonably compact form and according to the legal subdivisions of the public-land surveys if the land be surveyed, and in an approximately square or rectangular tract if the land be an unsurveyed tract, the length of which shall not exceed two and one-half times its width, and if he shall cause to be erected upon the land for which a permit is sought a monument not less than four feet high, at some conspicuous place thereon, and shall post a notice in writing on or near said monument, stating that an application for permit will be made within thirty days after date of posting said notice, the name of the applicant, the date of the notice, and such a general description of the land to be covered by such permit by reference to courses and distances from such monument and such other natural objects and permanent monuments as will reasonably identify the land, stating the amount thereof in acres, he shall, during the period of thirty days following such marking and posting, be entitled to a preference right over others to a permit for the land so identified. The applicant shall, within ninety days after receiving a permit, mark each of the corners of the tract described in the permit upon the ground with substantial monuments, so that the boundaries can be readily traced on the ground, and shall post in a conspicuous place upon the lands a notice that such permit has been granted and a description of the lands covered thereby: Provided, That in the Territory of Alaska prospecting permits not more than five in number may be granted to any qualified applicant for periods not exceeding four years, actual drilling operations shall begin within two years from date of permit, and oil and gas wells shall be drilled to a depth of not less than five hundred feet, unless valuable deposits of oil or gas shall be sooner discovered, within three years from date of the permit and to an aggregate depth of not less than two thousand feet unless valuable deposits of oil or gas shall be sooner discovered, within four years from date of permit: Provided further, That in said Territory the applicant shall have a preference right over others to a permit for land identified by temporary monuments and notice posted on or near the same for six months following such marking and posting, and upon receiving a permit he shall mark the corners of the tract described in the permit upon the ground with substantial monuments within one year after receiving such permit: And provided further, That any person holding a permit to prospect for oil or gas, issued under this Act or extended under the authority of this or any other Act in force on or after July 1, 1935, or for which timely and acceptable application for extension shall have been filed prior to said date, shall have the right, prior to the termination of such permit, to exchange the same for a lease to the area described in the permit without proof of discovery, at a royalty of not less than 121⁄2 per centum or value of the production, to be determined by the Secretary of the Interior by general rule and under such other conditions as are fixed in section 17 of this Act: And provided further, That no such lease shall be subject to the acreage limitations of section 27 of this Act, as amended, until one year after the discovery of valuable deposits of oil or gas thereon: And provided further, That an applicant for any such prospecting permit whose application is pending on the date of the passage of this Act shall have the right within six months thereafter to have his application for permit considered as an application for lease under section 17 hereof, otherwise his application shall be rejected." "SEC. 14. That upon establishing to the satisfaction of the Secretary of the Interior that valuable deposits of oil or gas have been discovered within the limits of the land embraced in any permit, the permittee shall be entitled to a lease for one-fourth of the land embraced in the prospecting permit: Provided, That the permittee shall be granted a lease for as much as one hundred and sixty acres of said lands, if there be that number of acres within the permit. The area to be selected by the permittee shall be in compact form and, if surveyed, to be described by the legal subdivisions of the public-land surveys; if unsurveyed, to be surveyed by the Government at the expense of the applicant for lease in accordance with rules and regulations to be prescribed by the Secretary of the Interior, and the lands leased shall be conformed to and be taken in accordance with the legal subdivisions of such surveys; deposits made to cover expense of surveys shall be deemed appropriated for that purpose, and any excess deposits may be repaid to the person or persons making such deposit or their legal representatives. Such leases shall be for a term of twenty years upon a royalty of 5 per centum in amount or value of the production and the annual payment in advance of a rental of $1 per acre, the rental paid for any one year to be credited against the royalties as they accrue for that year, and shall continue in force as prescribed in section 17 hereof for leases issued prior to July 1, 1935. The permittee shall also be entitled to a preference right to a lease for the remainder of the land in his prospecting permit at a royalty of not less than 122 per centum in amount or value of the production, and under such other conditions as are fixed for oil or gas leases issued under section 17 of this Act, the royalty to be determined by competitive bidding or fixed by such other method as the Secretary may by regulations prescribe: Provided further, That the Secretary shall have the right to reject any or all bids. "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 |