OIL SHALE LANDS

THURSDAY, FEBRUARY 26, 1931

UNITED STATES SENATE,

COMMITTEE ON PUBLIC LANDS AND SURVEYS,

Washington, D. C. The committee met, pursuant to call, at 10 o'clock a. m., in the committee room of the Committee on Interstate Commerce, Capitol, Senator Gerald P. Nye presiding.

Present: Senators Nye (chairman), Glenn, and Walsh of Montana.

Present also: Hon. Edward C. Finney, Solicitor Department of the Interior; Northcutt Ely, executive assistant to the Secretary of the Interior; U. E. Goerner, Esq., assistant law examiner, General Land Office; Mr. Ralph S. Kelley.

The CHAIRMAN. The committee will be in order.

Mr. ELY. Senator Walsh, these are the Obenchain reports and my reports to Secretary Wilbur. I think those should be incorporated in the record in order to clarify matters.

Senator WALSH of Montana. Those may be included in the record. (The Obenchain reports, referred to by Mr. Ely, together with Mr. Ely's report to Secretary Wilbur, read as follows:)

Memorandum for the Secretary.

DEPARTMENT OF THE INTERIOR,

GENERAL LAND OFFICE, Washington, May 28, 1930.

I have read Mr. Obenchain's report on the oil-shale situation in Colorado and Utah and concur in the report as submitted.

C. C. MOORE, Commissioner.

DEPARTMENT OF THE INTERIOR,

The SECRETARY OF THE INTERIOR

GENERAL LAND OFFICE, Washington, May 27, 1930.

(Through the Commissioner of the General Land Office).

SIR: In compliance with your instructions of March 1, 1930, and in accordance with the letter of the commissioner of March 3, 1930, detailing me to the field to investigate the oil-shale situation, I proceeded to Denver on April 2, 1930, and thereafter proceeded to Glenwood Springs, Colo., and Salt Lake City, Utah.

I found considerable antagonism against the department, the General Land Office, and the field service, by the oil-shale claimants, their attorneys and others connected with such claims. This feeling is more acute in Colorado than in Utah, possibly because of the greater activity in Colorado and partly because of the way the situation has been handled. The Denver division has been very active for years in examining and reporting hundreds of oil-shale claims, resulting in many controverted issues, while comparative little of such work had been done in the Salt Lake City district until recently.

The oil-shale controversy has been occasioned largely by the provisions of section 37 of the leasing act of February 25, 1920. Many claims were questioned and charges filed because of lack of sufficient assessment work for several years past. This action by the department was questioned by oil-shale claimants and suit was started in the courts to test the right of the Government to thus proceed, which finally resulted in a decision by the Supreme Court of the United States in what is known as the Krushnic case decided January 6, 1930.

That decision was thought by the oil-shale claimants, apparently, to settle entirely the question of assessment work. But the department, in its decision of February 28, 1930 (Exhibit D), referred to in the attorneys' statement to me, did not give the Krushnic decision such wide interpretation.

Accordingly, Mr. Kelley was, on January 15, 1930, directed to submit, as soon as possible, reports in all cases where shale locators defaulted on annual labor and there was no evidence of resumption of work, and to post notices on all such claims against which charges had not already issued, that the United States had taken possession of the lands because of claimant's default. Some progress along these lines had been made prior to my arrival at Denver, but it was soon evident that because of the great number of the claims and the inaccessibility of many, and the difficulty in locating the boundaries of claims on the ground in order that notices would be properly posted, without extra help and extraordinary effort the posting would be very slow. Soon after my arrival in Salt Lake, and finding similar conditions in Utah, steps were taken to increase the field force by transferring mineral examiners from the field division at Santa Fe, San Francisco, and Portland, besides drawing on the surveying service for surveyors and transitmen.

Parties were then organized, both in the Denver and Salt Lake divisions, for the field work, Mr. Moore having a total of 14 men, or 7 parties of 2 each, and Mr. Kelley having 15 men engaged in the work of examinations and posting. Mr. Moore of Salt Lake City estimates that the total number of oil-shale claims pending examination and posting, for which applications for patent have not been made, as of May 7, 1930, approximate 4,000. Abstracts covering approximately 3,500 oil-shale claims have been taken from the county records, leaving about 500 claims yet to be abstracted. Mr. Kelley reports that he has about 1,000 cases which require investigation before posting. The investigation is necessary in order to determine whether there had been a default in assessment work and whether assessment work had been resumed, prior to the time of such investigation.

The 1,000 oil shale cases in the Denver district upon which no patent applications have been filed, cover those which require investigation before posting and does not include all the claims in that district. Taking all classes of such claims, the number will probably exceed the 4,000 reported as pending in the Salt Lake district.

Under date of May 17, 1930, Mr. Moore, of Salt Lake City, reported that he is making excellent progress in examination and posting oil shale claims. He states that approximately by July 1, 1930, the claims of principal importance will have been examined and posted, and that he has not found any unusual interest or activity on the part of the claimants to resume work. No progress report of the work in the Denver district has yet been received.

An examination of the records of the district land office at Denver as of April S, 1930, showed that approximately 100 applications for patent were pending in that district upon which final action had not been taken. In 71 of these cases payments have been made for the land and final certificates issued dated from 1922 up to and including 1930. Payments were made in 10 other cases, but no final certificate issued, and in 18 cases no payments whatever have been made and consequently no final certificate issued.

These cases cover approximately 96,000 acres involving approximately $190,000 paid to the Government as purchase money. Since that time, however, 11 cases have been approved for patent, after charges had been dismissed, which involve $14,370, so that there now remains approximately $166,000 which the Government holds as purchase money on unpatented claims. In the Salt Lake district there were only 17 applications for patent pending as of May 7, 1930, all of which, however, were filed within practically the last year. In the Denver district there are approximately 30 cases ready for hearing provided no interlocutory motions are filed as to the right of the Government to proceed against such cases, which motions raise points of law which must

be decided as the cases arise. There were also 39 cases in which interlocutory motions have been filed recently and will be considered as promptly as possible.

The delay in taking final action in cases involving patent applications is the subject of much criticism by the claimants and their attorneys. They contend that the time of our field force, for some time past, has been consumed in examining locations for which no application for patent has been filed, when that time should have been used to clear up the patent application cases. In all of these cases charges of different kinds have been made by the Government, and the delay has not been entirely unavoidable. I do not mean to say that no action whatever has been taken on these cases during all these years, but only that final action has not been had. In fact, some hearings have been held, some only partially and others completed, while in others preliminary and intermediary action has been taken at various times. When the Krushnic case was taken into court, action was suspended in practically all of the cases which involved the question of assessment work, and since that decision was rendered on January 6, 1930, by the Supreme Court of the United States, considerable progress has been made toward clear listing and issuance of patents where the assessment work was the only charge made.

Action on applications for patent has not, to any extent, been delayed by the field work on locations, for all such cases in the Denver division have been investigated in the field and reports submitted. It may be necessary, in event a hearing is to be had, that a further checking up in the field will be required to obtain the latest data as to what has been done toward compliance with the law. The patent applications in the Salt Lake district have been invesigated and reported, except a few which have just recently been filed.

Many of these patent applications present considerable equity in and good faith on the part of the present holders. In many instances a group of local people now owning the claims purchased them from the original locators after having obtained legal advice as to the validity thereof from attorneys who were supposed to be versed in this class of work. They allege that large sums of money were paid for the claims and that since the purchase was made the assessment work, at large expense, has been kept up. The cost of the original purchase, the money paid for assessment work, and the expense of litigation for several years involve, as they allege, from $20,000 to $300,000 in the different cases. They advise that the funds of these groups have practically been exhausted, and it is a question with them whether they must abandon the claims and lose the money already spent or whether they will be able to provide more funds for further assessment work and for continued litigation. In some of these cases the charge has been made by the Government that one or more of the original locators were dummy ones which charge involves the validity of the location. These amounts of money were spent largely at a time when the general opinion prevailed that these oil-shale claims were in the same class as mining claims under the general mining law, unaffected by the provisions of the leasing act and would be so adjudicated. Outside of the question as to the validity of the locations, I believe that, as far as possible, any doubt as to other features of the case should be resolved in their favor.

The necessary delay in setting cases for hearing, because of the fact that no money has been available therefor, because of insufficient appropriations, and will not be available prior to July 1, 1930, is another cause for criticism. This condition exists, however, and can not be helped at this time. When the money becomes available for these hearings, there will be a great clamor on the part of all the claimants and their attorneys to have their particular cases heard first. As we have but one regular hearing officer, Mr. Heron, in the Denver district, it can readily be seen that considerable further delay will occur. The issues in these cases are hard fought with prominent and generally efficient attorneys appearing for the claimants. The Government attorney must, therefore, consume considerable time on each case to be prepared to conduct the hearing and to be ready to meet any and all questions which may arise during the course of the hearing. Besides the preparation by the Government attorney before the hearing, the taking of testimony itself consumes several days. In view of this situation, after my conference with Mr. Kelley, he contemplates using Mr. Bradshaw as an additional hearing officer to expedite this work. It is estimated that, notwithstanding the fact that some claimants may not ask for hearings or may default on charges made, the cases now to be heard will probably consume two years.

At these hearings it will be necessary that the mining engineers and examiners familiar with that particular case be present as Government witnesses, and if hearings are to be held as rapidly as possible after July 1, 1930, their presence at these hearings will necessitate their absence from the field during the season when such work can only be done, and will seriously interfere with the examination and posting of the oil shale claims. By that time, however, it is thought the urgent cases will have been posted and for that reason I believe that the hearings on the patent applications should proceed as rapidly as possible. This class of cases in the Salt Lake district is of such recent origin that no trouble will be experienced in that district.

There are two classes of claimants as far as cooperation with the Government is concerned:

(1) In many instances the attorneys and claimants have cooperated to the fullest extent and have been quite free in furnishing our field force with data to substantiate their allegations as to expenditures and improvements, and our examiners have likewise been ready at all times to cooperate in ascertaining the true facts. These people have stated that they have no criticism of the field force in Colorado and believe that they receive fair treatment.

(2) Many of the interested parties have refused to give any information to our field force, even when the claims apparently have merit, partly because of their animosity toward the field force. Some accuse Mr. Heron, the hearing officer, while admitting his ability, of using tactics not countenanced by regular practitioners of high standing. They state that he goes out of his way to impeach or libel witnesses when they testify against the Government, spends much time during the hearing in bringing extraneous matters in the case, and they think he is imbued with only one idea and that is to defeat the claim. In their opinion his attitude should be one of fairness to the claimant as well as to the Government and with the sole object of bringing out the facts whether they be against the Government or for it. Other attorneys advised me that they had no complaints to make as to the manner in which the hearing officer conducted his cases as he was well prepared, and was a dangerous man to have as an opponent.

From my investigation of this matter I am convinced that while every detailed action of Mr. Heron may not unqualifiedly be supported, in the main good reasons exist for his attitude as complained of. His action is not much different, if any, than that taken by his opponents. It is inevitable in any hard fought case that ill feeling crops up betwen opposing counsel, each having his own views as to how the proceedings should be conducted. Personally I believe that Mr. Heron is very capable and is determined to obtain the facts, but I am not convinced that his only idea is to defeat the claim. It may possibly be stated, with some degree of support, that attorneys opposing the Government in these cases are not exerting themselves to bring out any testimony which may be detrimental to their clients, leaving that up to the Government attorney. Taking all the circumstances into consideration, I believe that Mr. Heron's actions, generally, in these hearings cases should be supported.

I attach hereto a copy of a statement dated April 23, 1930, addressed to me by a committee of attorneys at Denver, in which they advocate certain lines of procedure. There are also attached a communication from ex-Senator Charles S. Thomas and one from Malcolm Lindsey, who also signed the joint paper. (Exhibits A, B, and C.)

At the outset the commitee contends that the policy of the Government had undergone a radical change toward oil shale claimants since the leasing act was passed. It is true that a change in procedure has been made and was compelled by the provisions of the leasing act of February 25, 1920. Before that act was passed the Government was not required, nor did it undertake, to consider defaults in yearly assessment work on claims initiated under the general mining law, as such defaults were left to adverse claimants and to the courts. The committee further contends that oil shale claims should be treated the same as claims for other minerals under the mining law, overlooking, or at least not recognizing, the effectiveness of the provisions of the leasing act. Under that act and under the Supreme Court decision in the Krushnic case, the department can not, in my opinion, refrain from raising the question of compliance with the law as to the assessment work.

Further, the committee objects to the department in considering itself, as they say, as an adverse claimant, and then proceeding to be the prosecutor,

the judge and the jury; that under such procedure it is impossible for the claimants to obtain justice largely because of the determination on the part of the department and all its agencies to secure all oil-shale lands possible for the Government.

The department is the custodian of the public lands for all the people and that office must be exercised for the benefit of the public in general and not merely on behalf of certain classes. I have failed to find evidence that the department and its agencies are determined to defeat valid claims. It may so appear to the claimants because of difficulty in determining the true facts, but my experience and the records made in oil shale cases, show that favorable action is taken when the evidence submitted shows compliance with the law under which the claim was initiated. The employees assigned to this work all along the line are men who would resent any intimation that the claims are to be defeated, regardless of their merits, and I am sure there is but one idea governing the disposition of such cases and that is to see that the claim is valid and that the law has been complied with regardless of whether the claimant be an individual or corporation.

Complaints are also made by the committee as to the action of the examiners in securing affidavits and the action of the hearings officer at the trial of such cases, the latter especially as to attacking the veracity of witnesses when put on the stand. These particular complaints were taken up by me with the different examiners and the hearings officer and their explanations satisfied me that where there was basis for such complaints very substantial reasons were given for such action. The complainants, I firmly believe, are not always fully advised of the facts surrounding such incidents, but have reached their conclusions from ex parte statements made probably in the best of faith. Their suggestion that they should be advised by the examiner of the grounds of objection before the report is made to Washington can not well be adopted entirely. I do think, however, that both the Government's representatives and the claimants should cooperate to the fullest extent in getting the facts, especially as to the value of assessment or patent work. I am assured by practically all of the examiners that they do make an effort to check up with the claimants, or their representatives, but that many times the information is absolutely refused. The attorneys refer to the more judicial attitude recently taken by the force of the field division, which resulted after reexamination in the withdrawal of charges and the clear listing of some cases for patent. This was the result of action by the claimants, or their representatives, in furnishing evidence that they had heretofore refused to furnish.

There is no authority of law by which power could be delegated to any committee, or any member of the department, to settle the disputed contests, as suggested by the committee of attorneys. The register, the commissioner, and the Secretary must, under the law, decide these cases in accordance with the facts in each case and the law applicable thereto. The present practice with regard to final action must, therefore, be continued, in my opinion.

Disputed facts play a large part in these cases. A lack of cooperation is responsible for a considerable number of these controverted cases. If a joint examination of the claims by our examiners and the claimants, or their representatives, where patent applications have been filed, can be made, it is probable that many adjustments may properly be made and the expense and delay of hearings avoided.

I would suggest, therefore, that in the cases now pending for patent two of our most experienced oil-shale examiners or engineers be designated to take up each of these cases and examine the same in the field entirely independent of what has been done before by other mining engineers or examiners, on condition that all the claimants in a group or in a number of groups, if the claims are in the same vicinity, appoint a representative or not more than two representatives who are familiar with this work, authorizing such representatives to cooperate with the two designated men from the field service, and stipulate that the finding of fact by their representative or representatives, or their agreement to certain facts, will be accepted as final by them. Upon the appointment of such representatives a joint field examination may then be made to check up the controverted points. If an agreement may be reached between the two sets of representatives, a report by our field men, accompanied by a statement of concurrence by claimants' representatives, can be submitted through the field division to the General Land Office where action would then be taken. If they can not agree on all points, each set of repre46780-31-15