All claims under the act of May 3, 1928 (45 Stat. 484), have now been considered. An appropriation of $19,357 was made by the act of March 4, 1933 (47 Stat. 1609), to cover approved claims for the loss of personal property, and, as stated above, the sum of $81,540.49 was appropriated to pay lost allotment claims on the other Sioux reservations. An appropriation of $79,038 to pay the 979 Pine Ridge allotment claims will mean a total cost of $179,935.49 for payment of all approved claims filed under the act of 1928.

In view of the foregoing, I recommend that an appropriation be authorized in the sum of $79,038 for payment of the 979 Pine Ridge allotment claims, approved by this Department on December 18, 1936, under the act of May 3, 1928 (45 Stat. 484). A proposed draft of a bill is enclosed.

The Acting Director of the Bureau of the Budget has advised that the proposed legislation is not in conflict with the financial program of the President.

Sincerely yours,

EXTENSION OF CERTAIN PROSPECTING PERMITS

JUNE 3, 1937.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. GREEVER, from the Committee on Public Lands, submitted the following

REPORT

[To accompany H. R. 4277]

The Committee on the Public Lands, to whom was referred the bill (H. R. 4277) to provide for the extension of certain prospecting permits, and for other purposes, after careful consideration and the holding of considerable hearings, report favorably thereon with the recommendation that the bill do pass without amendment.

STATEMENT OF FACT

On March 13, 1929, the issuance of oil and gas permits was suspended by the then Secretary of the Interior. Thereafter a large number of permits were canceled on the ground that no development had occurred and no equitable action by the permittees justified their extension. The remaining outstanding permits were extended upon a showing of expenditures and other equities, for not exceeding 2 years at a time, on the express condition that there be no drilling thereon for at least one-half of the period of extension. Because of an oversupply of oil and gas, the policy of the administration from 1929 to 1933 was to discourage or relieve from drilling and production upon existing permits.

April 4, 1932, the then Secretary of the Interior issued regulations permitting application for and issuance of new prospecting permits on the express condition that each applicant should agree to produce no oil or gas except pursuant to a plan of unit operation or other cooperative plans approved by the Secretary of the Interior. Thereafter, and during the next 3 years, all permits that were extended were subject to the filing of a stipulation by the permittee that he would put his lands in a unit or cooperative plan when required by the Secretary of the Interior.

Subsequently, regulations were issued by the Department of the Interior requiring each permittee to file in the Department a unit or cooperative plan, including his permit with other lands, or suffer cancelation. Approximately 2,000 plans were filed with the Department of the Interior and, because of the small available force to examine and dispose of same, a large percentage of the unit plans were not reached for approval or rejection until 1935 or 1936.

During the early part of the year 1935 a proposed amendment of the Oil Leasing Act was pending before Congress, and there was uncertainty as to what provisions would be made with respect to existing permits. This legislation was enacted August 21, 1935, and prohibited the issuance of any more oil or gas permits, substituting therefor leases with a minimum royalty of 12% percent in lieu of the 5 percent royalty fixed by the act of 1920 for one-fourth the area of prospecting permits. Section 1 of the act extended existing permits to December 31, 1937, and gave the Secretary of the Interior authority to extend permits on which diligence had been exercised or prospecting suspended to December 31, 1938.

By order of September 22, 1936, the Secretary announced that all pending permits where stipulations and a unit plan had been submitted were extended to December 31, 1937, but that all permits would be canceled on that date unless (1) discovery had been made on the permits; (2) the lands included in an approved unit plan, or (3) the permit had been converted into a lease under the act of August 21, 1935.

It is quite apparent from the foregoing that since 1929 permittees and those holding operating agreements with them have been, for a large part of the time, in a state of uncertainty as to whether to proceed with large expenditures in exploring for oil and gas. In other words, for a part of the time they were expressly prohibited from drilling and for another substantial part of the time were uncertain as to the status of their permits or as to whether unit plans when submitted would be approved, or whether if they started drilling and other development work they would be permitted to finish same and be entitled to the benefits of the act of February 25, 1920, including the 5-percent royalty.

A large percentage of the unit plans which have been submitted under the requirements of the Interior Department have been rejected either because the Department officials believed there was no probability of discovering oil or gas or because permittees were unable to secure the joining of such areas of State or privately owned lands as the Department insisted should be included in the proposed units. Permittees also believed that the Secretary of the Interior, in cases where they had equities, had exercised diligence, or where drilling had been suspended, would grant a further extension to December 31, 1938, under the act of August 21, 1935. Consequently these permittees and their operators have really not had free and unrestricted opportunity for a substantial period of time to prospect and drill the lands in these permits.

It must be borne in mind that wildcatting is an uncertain and expensive business. It involves very large expenditures of money, sometimes $250,000 for a single well, is subject to delays incident to accidents in the drilling operations, etc., and involves the expenditure of private moneys at absolutely no cost or risk to the Department of the

Interior or Government of the United States. These permittees and operators confer a public benefit by exploring vacant public lands and determining their geology and the existence or nonexistence of oil, gas, and other minerals therein. They should be accorded liberal treatment and given ample time and a reasonable reward if successful. The public at large and the Government stand to gain by such equitable treatment and not to lose.

It seems quite evident that fairness to the permittees and operators and the public benefit to be secured from additional prospecting on these existing permits will be served by the enactment of H. R. 4277, providing for further extension of existing oil and gas permits.

The hearings disclosed that if this bill is not passed it will not only work a hardship upon many persons who have done valuable work upon the public domain but will also result in an uneconomic production of oil which will add to an already overburdened market of that product, and that the passage of the bill is in the interests of conservation and orderly development of mineral resources.

Hereinbelow set forth is the report of the Secretary of the Interior on this legislation.

Hon. RENÉ L. DEROUEN,

THE SECRETARY OF THE INTERIOR,
Washington, April 13, 1937,

Chairman, Committee on the Public Lands,

House of Representatives.

MY DEAR MR. DEROUEN: By letter of February 20 you submitted a copy of H. R. 4277, entitled "A bill to provide for the extension of certain prospecting permits and for other purposes", with request for a report on the bill for your committee.

Permits to prospect for oil and gas were authorized by the act of February 25, 1920 (41 Stat. 437), to be granted for periods of not exceeding 2 years, and several subsequent acts authorized extensions of time of the permits. By the act of August 21, 1935 (49 Stat. 674), the permit system was abrogated, and it was provided that no prospecting permits should be issued except on applications filed 90 days or more prior to the date of the act, and that prospecting for and development of oil and gas deposits belonging to the United States should be done under leases requiring payment of a minimum annual acreage rental prior to production and a minimum of 121⁄2 percent royalty on the production. This act further provided that all outstanding permits theretofore extended be extended to December 31, 1937, subject to the conditions of prior extensions, and authorized the Secretary of the Interior to extend further any permit on which diligence has been exercised to, but not beyond, December 31, 1938; also, that any permittee, prior to the expiration of his permit, may exchange the same for a lease under the amendatory act.

In my report to the President for the fiscal year 1936, I stated:

"The act of August 21, 1935, constitutes an important forward step in the leasing policy for oil and gas that will reduce materially speculative operations using the public reserve as a base. It will also provide for a more businesslike development of the oil and gas resources of the public lands, and will result in a return to the Government of a proper share of the value of the mineral production. Under this act the proceeds of public-land mineral development will be returned to the States from which they are produced, in part, directly, for the support of schools and roads and in part, indirectly, through Federal construction of irrigation systems."

Of the several thousand permits issued there were at the date of the amendatory act over 6,000 outstanding. Over 1,700 permits have since been issued, making a total of about 7,800 permits embracing an estimated area of about 12,000,000 acres. Of these, the initial term of 2 years of about 1,400 will not expire until the calendar year 1938, but the remainder range in age from 2 to 15 years or Probably more than 2,000 of the permits will have been extended to December 31, 1938, because included in approved unit plans or because of drilling or some other measure of diligence warranting equitable consideration. The remainder, about 4,400 unless converted into leases under the amendatory act will probably become subject to cancelation on December 31, 1937, because of failure to exercise diligence.

more.