71ST CONGRESS 2d Session } SENATE { No. 616 REPORT GRANTING OF CERTAIN OIL AND GAS PROSPECTING PERMITS AND LEASES IN OREGON BASIN, WYO. APRIL 30 (calendar day, MAY 6), 1930.-Ordered to be printed Mr. KENDRICK, from the Committee on Public Lands and Surveys, submitted the following REPORT [To accompany S. 317] The Committee on Public Lands and Surveys, to whom was referred the bill (S. 317) to authorize the Secretary of the Interior to grant certain oil and gas prospecting permits and leases, having considered the same, report favorably thereon with the recommendation that the bill do pass with the following amendments: On page 1, line 6, in the parenthesis after the figures "437", insert a semicolon and the words "title 30, sec. 227, U. S. Code". On page 1, line 7, beginning with the word "northeast", strike out all down to and including the word "the" before the word "southeast", in line 2, page 2. On page 2, line 3, strike out the words "north half" and insert in lieu thereof the words "northwest quarter". The first amendment merely inserts a citation to the section of the United States Code which corresponds to section 19 of the general leasing act of 1920. The other two amendments eliminate from the bill certain lands, and lessen the area falling within the operation of the bill by one-half, leaving but 800 acres described in the bill instead of the 1,600 acres originally covered by the bill. This bill is identical with H. R. 479, which was considered and passed by the House in the last Congress (70th Cong.). It was subsequently reported out favorably by this committee (S. Rept. No. 1784, 70th Cong., 2d sess.) with amendments reducing the total acreage involved from 1,600 to 800 acres. Inasmuch as the bill was reported out just prior to the adjournment of that Congress it failed to receive final consideration. As will appear from the former report of this committee, which is appended and made a part of this report, the lands retained in the bill are those covered by five placer mining claims, for which the Oregon Basin Oil & Gas Co. applied for patents; these claims were made the subject of critical field investigations by representatives of the Interior Department on which was based a favorable report; the General Land Office "clear-listed" these five claims and recognized the earned right to patents by calling upon the company to make payment of the statutory purchase price of $2,000, which was promptly paid. Later, however, patent was denied by the Secretary of the Interior on the theory that the discoveries of oil and gas on these claims were not sufficient to warrant issuance of the patents for which the company had paid. While it is not deemed necessary to consider the soundness of the department's action, it is conceded that the company has proceeded in entire good faith, and, but for a difference of opinion with the department, would either have secured patent or, by application under section 19 of the general leasing act, would have been granted prospecting permits on a much greater area than the 800 acres provided for in this bill. In addition it should be mentioned that it is stated by the Interior Department that there has developed possible danger of drainage of oil from the lands on which grant of permit or lease is recommended, through operations conducted by others on neighboring lands. By reason of these conditions the matter appears to be one of emergency, calling for prompt action by Congress. This is especially true, as the neighboring lands from which oil is now being produced are held under Federal leases from which the United States secures a lower royalty than would be demanded on oil produced from the lands covered by this bill should it become a law. The following letter, addressed to the author of this bill by the Secretary of the Interior, is quoted from the printed transcript (p. 25) of the committee hearings on the identical bill, H. R. 479, in the Seventieth Congress, special attention being here called to the concluding paragraph thereof: Hon. F. E. WARREN, United States Senate. DEPARTMENT OF THE INTERIOR, MY DEAR SENATOR WARREN: In reply to your request of March 6, 1928, for information as to the probable effect on public interest of the legislation proposed in S. 767, a bill to authorize the Secretary of the Interior to grant certain oil and gas prospecting permits and leases for land in Oregon Basin, Wyo. In illustration of the following discussion I transmit a map showing (1) in outline the boundaries of (a) outstanding petroleum withdrawals affecting lands in Oregon Basin, (b) outstanding definitions under the act of February 25, 1920 (41 Stat. 437), of the known geological structure of the Wiley and Elk Butte fields, promulgated July 20, 1920, but effective as of February 25, 1920, and (2) by distinctive colors, (a) the lands described in Senate bill 767, (b) the claims patented to the Oregon Basin Oil and Gas Co. under the mining laws, and other privately owned or State-owned lands near by, and (c) the individual extent and serial numbers of outstanding oil and gas permits and leases under the act of February 25, 1920, in the immediate vicinity of the defined structure cited. From this map it is immediately apparent that the tracts affected by Senate bill 767, together with the adjoining mining claims heretofore patented to the Oregon Basin Oil & Gas Co., comprise about 72 per cent of the acreage within the known geological structure of the Wiley and Elk Butte fields as defined on the basis of development prior to February 25, 1920. Were the fields involved actually limited to the boundaries of these definitions the ratio suggested would unquestionably lend support to a suggestion that the enactment of the pro posed legislation would tend to a monopoly of both fields by its beneficiary. Two answers suggest themselves to any such thought. In the first place, 360 acres on the Wiley structure and 1,240 acres on the Elk Butte structure neither exceed nor even approximate the maximum of 2,560 acres that any qualified corporation or individual might acquire by prospecting permit under section 19 of the leasing act. In the second place, development since February 25, 1920, has demonstrated that neither field is in fact restricted to the boundaries established at that time as a basis for administrative action and that the productive area of both in sands untested prior to 1927 is far more extensive than the limits of the 1920 definitions suggest. The actual extent of the productive area of either field has not been so much as indicated by the results of development to date. It is therefore quite impossible at this time to estimate whether the producing areas ultimately defined will be two, three, or four times that of the 1920 definitions or to form any justifiable conclusions as to the ratio which will eventually hold between the acreage involved in Senate bill 767 and that of the fully developed Oregon Basin district. The boundary of the outstanding petroleum withdrawals shown on the accompanying map may be assumed to represent an extreme outer limit of productive area. Within that limit the diversity of interests represented by State and private lands and by the 34 prospecting permits and leases platted is sufficient to dispel any fear that the enactment of Senate bill 767 might foster a monopoly or anything approaching a monopoly of the field by the beneficiary of that bill. Oregon Basin is one of the few oil-producing areas in the public-land States in which the Government is the dominant owner of oil and gas rights in the proved and potentially productive acreage. Its interests there lie wholly in the efficient and conservative development of the entire field in accordance with the highest engineering standard and at a rate determined by the law of demand rather than of that of supply enforced by wasteful and unnecessary competition among an excessive number of lessees. The product of the area is a black, asphalt-base, high-sulphur oil for which there is no appreciable present demand in Wyoming or elsewhere and for which there is no reasonable prospect that a substantial demand will develop in the near future. Drilling and development must therefore be kept at the minimum consistent with adequate protection of public property from drainage through privately owned lands. To this end the Government acreage should be held in leaseholds of maximum area by companies or individuals of sufficient financial stability to meet the rental requirements of their leases over a long period of drilling inactivity without recourse to the expedient of producing and selling unwanted oil at low prices in order to avoid bankruptcy. Any legislation, therefore, tending to promote in this field the creation of operating units of the maximum size by existing law-2,560 acres within the limits of the same geological structures-is regarded in this department as distinctly in the public interest. The records of this department show that the Oregon Basin Oil & Gas Co. would have been entitled to the same consideration of its equities that the proposed legislation authorizes, had that company chosen to apply prior to August 25, 1920, for such consideration under section 19 of the leasing law rather than to seek patent under the mining laws of the lands involved. Although the mineral applications were denied, as recited in my report on Senate bill 767 under date of January 14, 1928, the records show expenditures in excess of $500 per claim, compliance with the mining laws in all respects except discovery, and no basis for questioning the good faith of the applicant. Inasmuch as the time limit fixed in the leasing law (six months from the date of its approval) for the filing of applications under its relief provisions had expired before adverse decisions were rendered on the mineral applications, and as no contingent applications for relief were filed prior to the expiration of that limit, this department is precluded from considering the equities of the mineral applicants under section 19 of the leasing law without the express authority of Congress conveyed by Senate bill 767 or like legislation. Very truly yours, HUBERT WORK. The report of this committee on H. R. 479, in the Seventieth Congress, is appended hereto and made a part of report, as follows: [Senate Report No. 1784, Seventieth Congress, second session] The Committee on Public Lands and Surveys, to whom was referred the bill (H. R. 479) to authorize the Secretary of the Interior to grant certain oil and gas prospecting permits and leases, having carefully considered the same, report favorably thereon with the recommendation that the bill do pass with the following amendments: " On page 1, line 8, beginning with the word "northeast' strike out all down to and including the word "the" before the word "southeast" in line 2, page 2. On page 2, line 3, after the words "and the" and before the word "and", strike out the words "north half" and insert in lieu thereof the words, "northwest quarter". After having held public hearings upon this bill, your committee concurs with the views expressed in the report of the House Committee on the Public Lands (hereto attached and made a part of this report) to the effect that the Oregon Basin Oil & Gas Co. is entitled to some equitable consideration at the hands of Congress. However, your committee does not believe that Congress is called upon to extend relief to this company to the extent carried by the bill as passed by the House of Representatives, and therefore recommends that the area of public lands included in the bill be reduced from 1,600 acres to 800 acres, and that the retained area be made identical with the areas embraced in five oil placer claims on which this company has been required to pay the Government purchase price, and on which final mineral entries have been allowed. While your committee recognizes that this company was the pioneer in this field, and while its good faith as claimant under the placer mining laws has not been questioned, even though its applications for placer patents were denied save as to five placer claims on which deep wells had been drilled to discovery of gas, your committee believes that substantial justice will be accorded the company, if, in addition to the five claims already patented, the company is given the further privilege of securing a prospecting permit (to be followed by lease upon discovery) covering the additional five claims upon which final mineral entries were allowed, after field investigation, and for which the company was required to make payment of the ordinary purchase price, amounting to $2,000 for the five claims. The following is quoted from a letter of the First Assistant Secretary of the Interior, under date of February 15, 1929, identifying the lands included in the said five mineral entries: "After field investigation, the Commissioner of the General Land Office called upon said company to complete its applications for patent on five claims, below enumerated and described, by making payment of the purchase money, and thereafter said company made such payment, amounting to $400 for each of five oil placer mining claims. "Said five claims, the serial number (Cheyenne series), and the land included in each entry so allowed, are as follows, all tracts being in T. 51 N., R. 100 W., sixth principal meridian, Wyoming: 044506, Lavender Placer, SE. 4 sec. 30044512, Lady Placer, NE. 4 sec. 31044508, Purple Placer, SE. 4 sec. 31. 044513, Samuel Placer, NW. 1⁄4 sec. 32 044511, Sarah Placer, SE. 4 sec. 32... Total area... Acres 160 160 160 160 160 800 "Thereafter, upon becoming informed of the action taken, the department directed that said entries be not passed to patent, inasmuch as the asserted discoveries relied upon by the company were deemed to be substantially similar to asserted discoveries upon other placer claims of the company, to which patent had been denied. "Said five mineral entries still remain intact upon the records of the General Land Office by instructions given by the department, in order to allow the tracts included therein to retain their status pending appeal by the company to Congress for relief in the premises, as per pending H. R. 479, Seventieth Congress." The report of the House Committee on the Public Lands (H. Rept. No. 538, 70th Cong., 1st sess.), is appended hereto and made a part of this report, as follows: [House Report No. 538, Seventieth Congress, first session] The Committee on the Public Lands, to whom was referred H. R. 479, to authorize the Secretary of the Interior to grant certain oil and gas prospecting permits and leases, covering certain described public lands in Wyoming, having |